Registration No. 33-73244
As filed with the Securities and Exchange Commission on December 31, 1996
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 10 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 12 X
(Check appropriate box or boxes)
TEMPLETON GLOBAL INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
700 CENTRAL AVENUE, P.O. BOX 33030, ST. PETERSBURG, FLORIDA 33733-8030
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (813) 823-8712
John K. Carter
700 Central Avenue
P.O. Box 33030
ST. PETERSBURG, FLORIDA 33733-8030
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b) of Rule 485
X on JANUARY 1, 1997 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
on pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
on pursuant to paragraph (a)(2) of Rule 485
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
- ------------------------------------------------------------------------------
The Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and filed its Rule 24f-2 Notice for the fiscal
year ended March 31, 1996 on May 29, 1996.
PAGE
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART A
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
1 Cover page Cover Page
2 Synopsis Expense Summary
3 Condensed Financial "Financial Highlights";
Information "How Do the Funds
Measure Performance?"
4 General Description "How Is the Trust Organized?";
of Registrant "How Do the Funds Invest Their Assets?";
"What Are the Funds' Potential Risks?"
5 Management of the Fund "Who Manages the Funds?"
5A Management's Discussion Contained in Registrant's Annual
of Fund Performance Report to Shareholders
6 Capital Stock and Other "How Are the Funds Organized?"; "Services
Securities to Help You Manage Your Account"; "What
Distributions Might I Received From the Funds?";
"How Taxation Affects You and the Funds?"
7 Purchase of Securities "How Do I Buy Shares?"; "May I Exchange
Being Offered Shares for Shares of Another Fund?";
"Transaction Procedures and Special
Requirements"; "Services to Help You Manage
Your Account"; "Who Manages the Funds?" "Useful
Terms and Definitions"
8 Redemption or Repurchase "May I Exchange Shares for Shares of Another
Fund?"; "How Do I Sell Shares?"; "Transaction
Procedures and Special Requirements"? "Services
to Help You Manage Your Account"
9 Pending Legal Procedures Not Applicable
</TABLE>
PAGE
TEMPLETON GLOBAL INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART B
<TABLE>
<CAPTION>
N-1A LOCATION IN
ITEM NO. ITEM REGISTRATION STATEMENT
<S> <C> <C>
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 General Information and Not Applicable
History
13 Investment Objectives and "How Do the Funds Invest Their Assets?";
Policies "Investment Restrictions"; "What Are the
Funds' Potential Risks?"
14 Management of the "Officers and Trustees"; "Investment
Registrant Advisory and Other Services"
15 Control Persons and "Officers and Trustees"; "Investment
Principal Holders of Advisory and Other Services"; "Miscellaneous
Securities Information?"
16 Investment Advisory and "Investment Advisory and Other Services";
Other Services "The Funds' Underwriter"
17 Brokerage Allocation and "How Do the Funds Buy Securities
Other Practices For Their Portfolio?"
18 Capital Stock and Other "Miscellaneous Information"; "See Prospectus
Securities "How Is The Trust Organized?"
19 Purchase, Redemption and "How Do I Buy, Sell and Exchange Shares?";
Pricing of Securities "How Are Fund Shares Valued?";
Being Offered "Financial Statements"
20 Tax Status "Additional Information on Distributions
and Taxes"
21 Underwriters "The Funds' Underwriter"
22 Calculation of Performance "How Do the Funds Measure Performance?"
Data
23 Financial Statements Financial Statements
</TABLE>
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PAGE
PART A
PROSPECTUS
PAGE
PROSPECTUS
& APPLICATION
LOGO
TEMPLETON REGION FUNDS
TEMPLETON GREATER
EUROPEAN FUND
TEMPLETON LATIN
AMERICA FUND
--------------------------------------------------
JANUARY 1, 1997
INVESTMENT STRATEGY
GLOBAL GROWTH
LOGO
- --------------------------------------------------------------------------------
This prospectus describes the Advisor Class shares of Templeton Greater
European Fund and Templeton Latin America Fund of Templeton Global
Investment Trust. This prospectus contains information you should know
before investing in the Funds. Please keep it for future reference.
INVESTMENTS IN FOREIGN SECURITIES INVOLVE CERTAIN CONSIDERATIONS WHICH
ARE NOT NORMALLY INVOLVED IN INVESTMENT IN SECURITIES OF U.S. COMPANIES,
AND AN INVESTMENT IN THE FUNDS MAY BE CONSIDERED SPECULATIVE. EACH FUND
MAY INVEST WITHOUT LIMIT IN EMERGING MARKET COUNTRIES, BORROW MONEY FOR
INVESTMENT PURPOSES, AND MAY INVEST UP TO 15% OF ITS ASSETS IN ILLIQUID
SECURITIES, INCLUDING UP TO 10% OF ITS ASSETS IN RESTRICTED SECURITIES,
WHICH MAY INVOLVE GREATER RISK AND INCREASED FUND EXPENSES. SEE "WHAT
ARE THE FUNDS' POTENTIAL RISKS?"
The Trust's Advisor Class SAI, dated January 1, 1997, as may be amended
from time to time, includes more information about the Fund's procedures
and policies. It has been filed with the SEC and is incorporated by
reference into this prospectus. For a free copy or a larger print
version of this prospectus, call 1-800/DIAL BEN or write the Funds at
the address shown.
Advisor Class shares are only available for purchase by certain persons,
including, among others, certain financial institutions (such as banks,
trust companies, savings institutions and credit unions); government and
tax-exempt entities; certain pension, profit sharing and employee
benefit plans; certain qualified groups, including family trusts,
endowments, foundations and corporations; Franklin Templeton Fund
Allocator Series; and directors, trustees, officers and full time
employees (and their family members) of Franklin Templeton Group and the
Franklin Templeton Group of Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY OF THE U.S. GOVERNMENT. SHARES OF THE FUNDS INVOLVE INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PAGE
TEMPLETON
REGION FUNDS
This prospectus is not an offering of the securities herein
described in any state in which the offering is not authorized.
No sales representative, dealer, or other person is
authorized to give any information or make any representations
other than those contained in this prospectus. Further
information may be obtained from Distributors.
----------------------------------------------------------
This prospectus describes the Templeton Region Funds, which are
the Templeton Greater European Fund ("Greater European Fund")
and the Templeton Latin America Fund ("Latin America Fund")
(each a "Fund" and collectively the "Funds").
The Funds are separate series of Templeton Global Investment Trust
(the "Trust"), an open-end management investment company.
----------------------------------------------------------
When reading this prospectus, you will see
certain terms beginning with capital letters.
This means the term is explained
in our glossary section.
PAGE
<TABLE>
<S> <C> <C>
TABLE OF CONTENTS
ABOUT THE FUND
Expense Summary ....................2
How Do the Funds Invest Their
Assets? .......4
What Are the Funds' Potential
Risks? ........14
Who Manages the
Funds? ................18
How Do the Funds Measure
Performance? ....20
How Is the Trust
Organized? ..............21
How Taxation Affects You and the
Funds ......22
ABOUT YOUR ACCOUNT
How Do I Buy
Shares? ..................23
May I Exchange Shares for Shares of
Another Fund? ..25
TEMPLETON How Do I Sell
REGION Shares? ...................28
FUNDS What Distributions Might I Receive
From the Funds? ..29
- ------------------------ Transaction Procedures and Special
January 1, 1997 Requirements ...30
Services to Help You Manage Your
700 Central Avenue Account ......34
St. Petersburg, Florida GLOSSARY
33701 Useful Terms and
1-800/DIAL BEN Definitions ................38
</TABLE>
PAGE
ABOUT THE FUND
EXPENSE SUMMARY
This table is designed to help you understand the costs of investing in the
Advisor Class shares of the Funds. Because Advisor Class shares were not offered
to the public before January 1, 1997, the table is based on the historical
expenses of the Class I shares of the Funds, after fee reductions and expense
limitations, for the fiscal year ended March 31, 1996, and are annualized(+).
Your actual expenses may vary.
<TABLE>
<CAPTION>
Greater European Latin America
Fund Fund
A. Shareholder Transaction Expenses(++) Advisor Class Advisor Class
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases NONE NONE
Exchange Fee (per transaction) $5.00(+++) $5.00(+++)
B. Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management Fees (after fee reduction) 0.00%(++++) 0.00%(++++)
Rule 12b-1 Fees NONE NONE
Other Expenses (audit, legal,
business management, transfer agent
and custodian)(after expense
reimbursement) 1.50% 2.00%
-------
------
Total Fund Operating Expenses (after
expense reimbursement) 1.50%(++++) 2.00%(++++)
-------
------
C. Example
</TABLE>
Assume the annual return for Advisor Class shares is 5% and operating
expenses are as described above. For each $1,000 investment, you would pay
the following projected expenses if you sold your shares after the number of
years shown.
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GREATER EUROPEAN FUND $ 15 $47 $ 82 $ 179
LATIN AMERICA FUND $ 20 $63 $108 $ 233
</TABLE>
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN.
The Funds pay their operating expenses. The effects of these expenses are
reflected in the Net Asset Value or dividends paid on Advisor Class shares
and are not directly charged to your account.
(+)Unlike Advisor Class shares, the Class I shares of the Funds have a
front-end sales charge and Rule 12b-1 fees.
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2
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(++)If your transaction is processed through your Securities Dealer you may be
charged a fee by your Securities Dealer for this service.
(+++)$5.00 fee is only for Market Timers. We process all other exchanges
without a fee.
(++++)The Investment Manager and FT Services have agreed in advance to reduce
their respective fees in order to limit Greater European Fund's total expenses
to an annual rate of 1.50% of average daily net assets through August 1, 1997;
and to limit Latin America Fund's total expenses to an annual rate of 2.00% of
average daily net assets through August 1, 1997. If these fee reductions are
insufficient to so limit the Funds' expenses, FT Services has agreed to make
certain payments to reduce the Funds' expenses. Without these reductions,
Greater European Fund's "Other Expenses" would have been 2.11% for Advisor Class
shares and the "Total Fund Operating Expenses" would have been 3.21% for
Advisor Class shares; Latin America Fund's "Other Expenses" would have been
2.17% for Advisor Class shares and the "Total Fund Operating Expenses" would
have been 3.67% for Advisor Class shares. After August 1, 1997, these
agreements may end at any time upon notice to the Board.
Templeton Region Funds -
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HOW DO THE FUNDS INVEST THEIR ASSETS?
The Funds' Investment Objectives
Greater European Fund's investment objective is long-term capital appreciation.
The Fund seeks to achieve its objective by investing primarily in equity
securities (as defined below) of Greater European Companies. As used in this
prospectus, the term "Greater European Company" means a company (i) that is
organized under the laws of, or with a principal office and domicile in, a
country in Greater Europe, (ii) for which the principal equity securities
trading market is in Greater Europe, or (iii) that derives at least 50% of its
revenues or profits from goods produced or sold, investments made, or services
performed in Greater Europe or that has at least 50% of its assets situated in
Greater Europe. As used in this prospectus, the term "Greater Europe" means
Western, Central and Eastern Europe (including Ukraine, Belarus, Latvia,
Lithuania and Estonia) and Russia. Under normal market conditions, the Fund
will invest at least 75% of its total assets in the equity securities of
Greater European Companies. The balance of the Fund's assets will be invested
in (i) debt securities (as defined below) issued by Greater European Companies
or issued or guaranteed by Greater European government entities, (ii) equity
securities and debt obligations of issuers outside Greater Europe, and (iii)
short-term and medium-term debt securities of the type described below under
"Temporary Investments."
Latin America Fund's investment objective is long-term capital appreciation. The
Fund seeks to achieve its objective by investing primarily in equity and debt
securities of issuers in the following Latin American countries: Argentina,
Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Ecuador, El
Salvador, French Guyana, Guatemala, Guyana, Honduras, Mexico, Nicaragua,
Panama, Paraguay, Peru, Surinam, Trinidad/Tobago, Uruguay, and Venezuela. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in equity and debt securities of issuers in the countries named above. The
balance of the Fund's assets will be invested in (i) equity securities and debt
obligations of companies and government entities of countries other than those
named above, and (ii) short-term and medium-term debt securities of the type
described below under "Temporary Investments."
Information Regarding Both Funds. Each Fund's investment objective and the
investment restrictions set forth under "Investment Restrictions" in the SAI are
fundamental and may not be changed without shareholder approval. All other
investment policies and practices described in this prospectus are not
fundamental, and may be changed by the Board without shareholder approval.
There can be no assurance that either Fund's investment objective will be
achieved.
- Templeton Region Funds
4
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As used in this prospectus, "equity securities" refers to common stock,
preferred stock, securities convertible into or exchangeable for such
securities, warrants or rights to subscribe to or purchase such securities, and
sponsored or unsponsored American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs")
(collectively, "depositary receipts"). For capital appreciation, Greater
European Fund may invest up to 25% of its total assets, and Latin America Fund
may invest without limit, in debt securities (defined as bonds, notes,
debentures, commercial paper, time deposits and bankers' acceptances, and which
may include structured investments) which are rated in any rating category by
Moody's or S&P or which are unrated by any rating agency. Such securities may
include high-risk, lower quality debt securities, commonly referred to as "junk
bonds." See "What Are the Funds' Potential Risks?" As an operating policy,
which may be changed by the Board, neither Fund will invest more than 5% of its
total assets in debt securities rated lower than Baa by Moody's or BBB by S&P.
Certain debt securities can provide the potential for capital appreciation
based on various factors such as changes in interest rates, economic and market
conditions, improvement in an issuer's ability to repay principal and pay
interest, and ratings upgrades. Additionally, convertible bonds offer the
potential for capital appreciation through the conversion feature, which
enables the holder of the bonds to benefit from increases in the market price
of the securities into which they are convertible. Debt securities are subject
to certain market and credit risks. See "How Do the Funds Invest Their
Assets? - Debt Securities," in the SAI.
Each Fund Investment Manager will select equity investments for the respective
Fund on the basis of fundamental company-by-company analysis (rather than
broader analyses of specific industries or sectors of the economy). Although an
Investment Manager will consider historical value measures, such as
price/earnings ratios, operating profit margins and liquidation values, the
primary factor in selecting equity securities will be the company's current
price relative to its long-term earnings potential, or real book value, as
determined by the Investment Manager. Securities considered for purchase by a
Fund may be listed or unlisted, and may be issued by companies in various
industries, with various levels of market capitalization. The Investment
Managers will actively manage the Funds' assets in response to market,
political and general economic conditions, and will seek to adjust each Fund's
investments based on its perception of which investments would best enable the
Fund to achieve its investment objective.
As a diversified investment company, each Fund, with respect to 75% of its total
assets, may invest no more than 5% of its total assets in securities issued by
any
Templeton Region Funds -
5
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one company or government, exclusive of U.S. government securities. Although
each Fund may invest up to 25% of its assets in a single industry, the Funds
have no present intention of doing so. Each Fund may not invest more than 5% of
its assets in warrants (exclusive of warrants acquired in units or attached to
securities) or more than 15% of its assets in securities with a limited trading
market.
Each Fund may lend its portfolio securities and borrow money for investment
purposes (i.e., "leverage" its portfolio). In addition, each Fund may enter into
transactions in options on securities, securities indices and foreign
currencies, forward foreign currency contracts, structured investments, and
futures contracts and related options. These are generally referred to as
derivative instruments, and involve special risk factors, which are described
below. When deemed appropriate by an Investment Manager, the respective Fund
may invest cash balances in repurchase agreements and other money market
investments to maintain liquidity in an amount to meet expenses or for
day-to-day operating purposes. These investment techniques are described below
and under the heading "How Do the Funds Invest Their Assets?" in the SAI.
When an Investment Manager believes that market conditions warrant, either Fund
may adopt a temporary defensive position and may invest without limit in money
market securities denominated in U.S. dollars or in the currency of any foreign
country. See "Temporary Investments."
The Funds do not emphasize short-term trading profits and usually expect to
have an annual portfolio turnover rate not exceeding 50%.
Brady Bonds. Latin America Fund may invest without limit in certain debt
obligations customarily referred to as "Brady Bonds," which are created through
the exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring under a plan introduced by
former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds are not considered U.S. government securities and are considered
speculative. Brady Plan debt restructurings have been implemented to date in
several countries, including Argentina, Bulgaria, Costa Rica, the Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, the Philippines, Uruguay, Venezuela,
Bolivia, Niger, and Poland (collectively, the "Brady Countries"). In addition,
Brazil has concluded a Brady-like plan. It is expected that other countries will
undertake a Brady Plan debt restructuring in the future, including Panama, Peru,
and Poland.
Brady Bonds have been issued only recently and, accordingly, do not have a long
payment history. They may be collateralized or uncollateralized and issued in
- Templeton Region Funds
6
PAGE
various currencies (although most are U.S. dollar-denominated) and they are
actively traded in the over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal by U.S. Treasury zero coupon bonds which have the same maturity as
the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed-rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments, but generally are not collateralized. Brady Bonds are often viewed as
having three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity (these uncollateralized amounts constitute the
"residual risk").
Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and interest coupon payments
collateralized on an 18-month rolling-forward basis by funds held in escrow by
an agent for the bondholders. A significant portion of the Venezuelan Brady
Bonds and the Argentine Brady Bonds issued to date have principal repayments at
final maturity collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and/or interest coupon payments
collateralized on a 14-month (for Venezuela) or 12-month (for Argentina)
rolling-forward basis by securities held by the Federal Reserve Bank of New
York as collateral agent.
Brady Bonds involve various risk factors including residual risk and the history
of defaults with respect to commercial bank loans by public and private entities
of Brady Countries. There can be no assurance that Brady Bonds in which Latin
America Fund may invest will not be subject to restructuring arrangements or to
requests for new credit, which may cause the Fund to suffer a loss of interest
or principal on any of its holdings.
Types of Securities in which the Funds May Invest
The Funds are authorized to use the various securities and investment techniques
described below. Although these strategies are regularly used by some investment
Templeton Region Funds -
7
PAGE
companies and other institutional investors in various markets, some of these
strategies cannot at the present time be used to a significant extent by the
Funds in some of the markets in which the Funds will invest and may not be
available for extensive use in the future.
Temporary Investments. For temporary defensive purposes, each Fund may invest
up to 100% of its total assets in the following money market securities,
denominated in U.S. dollars or in the currency of any foreign country, issued by
entities organized in the U.S. or any foreign country: short-term (less than
twelve months to maturity) and medium-term (not greater than five years to
maturity) obligations issued or guaranteed by the U.S. government or the
governments of foreign countries, their agencies or instrumentalities; finance
company and corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 by Moody's or A or better by S&P or, if
unrated, of comparable quality as determined by an Investment Manager;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks; and repurchase agreements with banks and broker-dealers
with respect to such securities.
Borrowing. Each Fund may borrow up to one-third of the value of its total assets
from banks to increase its holdings of portfolio securities. Under the 1940 Act,
each Fund is required to maintain continuous asset coverage of 300% with respect
to such borrowings and to sell (within three days) sufficient portfolio holdings
to restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidations of a Fund's holdings may be
disadvantageous from an investment standpoint. Leveraging by means of borrowing
may exaggerate the effect of any increase or decrease in the value of portfolio
securities on a Fund's net asset value, and money borrowed will be subject to
interest and other costs (which may include commitment fees and/or the cost of
maintaining minimum average balances) which may or may not exceed the income
received from the securities purchased with borrowed funds.
Loans of Portfolio Securities. Each Fund may lend to broker-dealers portfolio
securities with an aggregate market value of up to one-third of the Fund's total
assets to generate income for the purpose of offsetting operating expenses. Such
loans must be secured by collateral (consisting of any combination of cash, U.S.
government securities or irrevocable letters of credit) in an amount at least
equal (on a daily marked-to-market basis) to the current market value of the
securities loaned. A Fund may terminate the loans at any time and obtain the
return of the securities loaned within five business days. A Fund will continue
to receive any interest or dividends paid on the loaned securities and will
continue to retain any voting rights with respect to the securities. In the
event that the
- Templeton Region Funds
8
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borrower defaults on its obligation to return borrowed securities, because of
insolvency or otherwise, a Fund could experience delays and costs in gaining
access to the collateral and could suffer a loss to the extent that the value
of the collateral falls below the market value of the borrowed securities.
Options on Securities or Indices. Each Fund may write (i.e., sell) covered put
and call options and purchase put and call options on securities or securities
indices that are traded on U.S. and foreign exchanges or in the over-the-counter
markets. An option on a security is a contract that permits the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of
a put option) from or to the writer of the option at a designated price during
the term of the option. An option on a securities index permits the purchaser
of the option, in return for the premium paid, the right to receive from the
seller cash equal to the difference between the closing price of the index and
the exercise price of the option. A Fund may write a call or put option only if
the option is "covered." This means that so long as a Fund is obligated as the
writer of a call option, it will own the underlying securities subject to the
call, or hold a call at the same or lower exercise price, for the same exercise
period, and on the same securities as the written call. A put is covered if a
Fund maintains liquid assets with a value equal to the exercise price in a
segregated account, or holds a put on the same underlying securities at an
equal or greater exercise price. The value of the underlying securities on
which options may be written at any one time will not exceed 15% of the total
assets of a Fund. A Fund will not purchase put or call options if the aggregate
premium paid for such options would exceed 5% of its total assets at the time
of purchase.
Forward Foreign Currency Contracts and Options on Foreign Currencies. The Funds
will normally conduct foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward contracts to purchase or sell foreign
currencies. The Funds will generally not enter into a forward contract with a
term of greater than one year. A forward contract is an obligation to purchase
or sell a specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and their
customers.
The Funds will generally enter into forward contracts only under two
circumstances. First, when a Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock
in" the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed
to settle the
Templeton Region Funds -
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transaction. Second, when a Fund's Investment Manager believes that the
currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to sell
or buy the former foreign currency (or another currency which acts as a proxy
for that currency) approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." The Funds have
no specific limitation on the percentage of assets they may commit to forward
contracts, subject to their stated investment objectives and policies, except
that a Fund will not enter into a forward contract if the amount of assets set
aside to cover forward contracts would impede portfolio management or the
Fund's ability to meet redemption requests. Although forward contracts will be
used primarily to protect the Funds from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted.
The Funds may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and a Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate movements
adverse to a Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by the Funds are traded on U.S. and foreign exchanges or over-the-
counter.
Futures Contracts. For hedging purposes only, each Fund may buy and sell
financial futures contracts, stock and bond index futures contracts, foreign
currency futures contracts and options on any of the foregoing. A financial
futures contract is an agreement between two parties to buy or sell a specified
debt security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the end of the contract
period. A futures contract on a foreign currency is an agreement to buy or sell
a specified amount of a currency for a set price on a future date.
When a Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
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contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, when a Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"How Do the Funds Invest Their Assets? - Futures Contracts," in the SAI.
Repurchase Agreements. For temporary defensive purposes and for cash management
purposes, the Funds may enter into repurchase agreements with U.S. banks and
broker-dealers. Under a repurchase agreement, a Fund acquires a security from a
U.S. bank or a registered broker-dealer and simultaneously agrees to resell the
security back to the bank or broker-dealer at a specified time and price. The
repurchase price is in excess of the original purchase price paid by a Fund by
an amount which reflects an agreed-upon rate of return and which is not tied to
any coupon rate on the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the underlying security
and therefore will be fully collateralized. However, if the bank or broker-
dealer should default on its obligation to repurchase the underlying security, a
Fund may experience a delay or difficulties in exercising its rights to realize
upon the security and might incur a loss if the value of the security declines,
as well as incur disposition costs in liquidating the security.
Depositary Receipts. ADRs are depositary receipts typically used by a U.S. bank
or trust company which evidence ownership of underlying securities issued by a
foreign corporation. EDRs and GDRs are typically issued by foreign banks or
trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a U.S. corporation. Generally, depositary receipts in registered form
are designed for use in the U.S. securities market and depositary receipts in
bearer form are designed for use in securities markets outside the U.S.
Depositary receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary receipts
may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of depositary receipts. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such
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information and the market value of the depositary receipts. Depositary receipts
also involve the risks of other investments in foreign securities, as discussed
below. For purposes of a Fund's investment policies, the Fund's investments in
depositary receipts will be deemed to be investments in the underlying
securities.
Illiquid and Restricted Securities. Each Fund may invest up to 15% of its total
assets in illiquid securities, for which there is a limited trading market and
for which a low trading volume of a particular security may result in abrupt and
erratic price movements. A Fund may be unable to dispose of its holdings in
illiquid securities at then-current market prices and may have to dispose of
such securities over extended periods of time. A Fund may also invest in
securities that are sold (i) in private placement transactions between their
issuers and their purchasers and that are neither listed on an exchange nor
traded over-the-counter, or (ii) in transactions between qualified
institutional buyers pursuant to Rule 144A under the 1933 Act. Such restricted
securities are subject to contractual or legal restrictions on subsequent
transfer. As a result of the absence of a public trading market, such
restricted securities may in turn be less liquid and more difficult to value
than publicly traded securities. Although these securities may be resold in
privately negotiated transactions, the prices realized from the sales could,
due to illiquidity, be less than those originally paid by a Fund or less than
their fair value. In addition, issuers whose securities are not publicly traded
may not be subject to the disclosure and other investor protection requirements
that may be applicable if their securities were publicly traded. If any
privately placed or Rule 144A securities held by a Fund are required to be
registered under the securities laws of one or more jurisdictions before being
resold, a Fund may be required to bear the expenses of registration. Each Fund
will limit its investment in restricted securities other than Rule 144A
securities to 10% of its total assets, and will limit its investment in all
restricted securities, including Rule 144A securities, to 15% of its total
assets. Restricted securities, other than Rule 144A securities determined by
the Board of Trustees to be liquid, are considered to be illiquid and are
subject to a Fund's limitation on investment in illiquid securities.
Structured Investments. Included among the issuers of debt securities in which
the Funds may invest are entities organized and operated solely for the purpose
of restructuring the investment characteristics of various securities. These
entities are typically organized by investment banking firms which receive fees
in connection with establishing each entity and arranging for the placement of
its securities. This type of restructuring involves the deposit with or
purchase by an entity, such as a corporation or trust, of specified instruments
and the issuance by that entity of one or more classes of securities
("structured investments")
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backed by, or representing interests in, the underlying instruments. The cash
flow on the underlying instruments may be apportioned among the newly issued
structured investments to create securities with different investment
characteristics such as varying maturities, payment priorities or interest rate
provisions; the extent of the payments made with respect to structured
investments is dependent on the extent of the cash flow on the underlying
instruments. Because structured investments of the type in which the Funds
anticipate investing typically involve no credit enhancement, their credit risk
will generally be equivalent to that of the underlying instruments.
The Funds are permitted to invest in a class of structured investments that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured investments typically have higher yields and present
greater risks than unsubordinated structured investments. Although a Fund's
purchase of subordinated structured investments would have a similar economic
effect to that of borrowing against the underlying securities, the purchase will
not be deemed to be leverage for purposes of the limitations placed on the
extent of a Fund's assets that may be used for borrowing activities.
Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, a Fund's investment in these
structured investments may be limited by the restrictions contained in the 1940
Act described below under "Investment Companies." Structured investments are
typically sold in private placement transactions, and there currently is no
active trading market for structured investments. To the extent such
investments are illiquid, they will be subject to the restrictions set forth in
"Types of Securities in Which the Funds May Invest" above and in the SAI under
"Investment Restrictions."
Investment Companies. Each Fund may invest in other investment companies,
except those for which its Investment Manager serves as investment adviser or
sponsor, which invest principally in securities in which the Fund is authorized
to invest. Under the 1940 Act, each Fund may invest a maximum of 10% of its
total assets in the securities of other investment companies and not more than
5% of the Fund's total assets in the securities of any one investment company,
provided the investment does not represent more than 3% of the voting stock of
the acquired investment company at the time such shares are purchased. To the
extent a Fund invests in other investment companies, a Fund's shareholders will
incur certain duplicative fees and expenses, including investment advisory
fees. A Fund's investment in certain investment companies will result in
special U.S. federal income tax consequences described under "Additional
Information on Distributions and Taxes" in the SAI.
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WHAT ARE THE FUNDS' POTENTIAL RISKS?
You should understand that all investments involve risk and there can be no
guarantee against loss resulting from an investment in the Funds, nor can there
be any assurance that the Fund's investment objective will be attained. As with
any investment in securities, the value of, and income from, an investment in a
Fund can decrease as well as increase, depending on a variety of factors which
may affect the values and income generated by a Fund's portfolio securities,
including general economic conditions and market factors. In addition to the
factors which affect the value of individual securities, a shareholder may
anticipate that the value of the shares of a Fund will fluctuate with movements
in the broader equity and bond markets. A decline in the stock market of any
country in which a Fund is invested in equity securities may also be reflected
in declines in the price of shares of the Fund. Changes in the prevailing rates
of interest in any of the countries in which a Fund is invested in fixed income
securities will likely affect the value of such holdings and thus the value of
Fund shares. Increased rates of interest, which frequently accompany inflation
and/or a growing economy, are likely to have a negative effect on the value of
Fund shares. In addition, changes in currency valuations will also affect the
price of shares of the Funds. History reflects both decreases and increases in
stock markets and interest rates in individual countries and throughout the
world, and in currency valuations, and these may reoccur unpredictably in the
future. Additionally, investment decisions made by an Investment Manager will
not always be profitable or prove to have been correct. Neither Fund is
intended as a complete investment program.
Foreign Currency Exchange. Since the Funds are authorized to invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates relative to the U.S. dollar will
affect the value of securities in the respective portfolios and the unrealized
appreciation or depreciation of investments insofar as U.S. investors are
concerned. Changes in foreign currency exchange rates relative to the U.S.
dollar will also affect a Fund's yield on assets denominated in currencies
other than the U.S. dollar. The Funds usually effect currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign exchange market or through entering into forward contracts. However,
some price spread on currency exchange transactions (to cover service charges)
will be incurred when a Fund converts assets from one currency to another. Many
of the currencies of the countries in which the Funds may invest have
experienced devaluations relative to the U.S. dollar, and may be more highly
volatile than currencies of other more established markets.
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Foreign Investments. The Funds have the right to purchase securities in any
foreign country, developed or developing. Investors should consider carefully
the substantial risks involved in investing in securities issued by companies
and governments of foreign nations, which are in addition to the usual risks
inherent in domestic investments. Each Fund's performance is closely tied to
economic and political conditions within the geographic area of its respective
investments. Some of the countries in which the Funds may invest are considered
emerging markets, in which the risks generally associated with foreign
investments are heightened. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations (including, for example, withholding taxes on interest and dividends)
or other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), foreign investment controls on daily stock
market movements, default in foreign government securities, political or social
instability, or diplomatic developments which could affect investment in
securities of issuers in foreign nations. Some countries may withhold portions
of interest and dividends at the source. In addition, in many countries there
is less publicly available information about issuers than is available in
reports about companies in the U.S. Foreign companies are not generally subject
to uniform accounting, auditing and financial reporting standards, and auditing
practices and requirements may not be comparable to those applicable to U.S.
companies. The Funds may encounter difficulties or be unable to vote proxies,
exercise shareholder rights, pursue legal remedies, and obtain judgments in
foreign courts.
Brokerage commissions, custodial services, and other costs relating to
investments in foreign countries are generally more expensive than in the U.S.
Foreign securities markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of a Fund are uninvested and no return is earned
thereon. The inability of a Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Fund due to subsequent declines
in value of the portfolio security or, if the Fund has entered into a contract
to sell the security, could result in possible liability to the purchaser.
In many foreign countries there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
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than in the U.S. There is an increased risk, therefore, of uninsured loss due to
lost, stolen, or counterfeit stock certificates. In addition, the foreign
securities markets of many of the countries in which a Fund may invest may also
be smaller, less liquid, and subject to greater price volatility than those in
the U.S. As an open-end investment company, each Fund is limited in the extent
to which it may invest in illiquid securities. The foregoing risks may be
heightened for investments in Eastern Europe and/or Latin America, and there
are further risks specific to investments in those regions. See "What Are the
Funds' Potential Risks?" in the SAI.
Prior governmental approval of foreign investments may be required under
certain circumstances in some developing countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
developing countries. Foreign ownership limitations also may be imposed by the
charters of individual companies in developing countries to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital and proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental registration or approval for such
repatriation.
Further, the economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade.
As a non-fundamental policy, each Fund will limit its investment in Russian
securities to 5% of its total assets. Russian securities involve additional
significant risks, including political and social uncertainty (for example,
regional conflicts and risk of war), currency exchange rate volatility,
pervasiveness of corruption and crime in the Russian economic system, delays in
settling portfolio transactions and risk of loss arising out of Russia's system
of share registration and custody. For more information on these risks and
other risks associated with Russian securities, please see "What Are the Funds'
Potential Risks?" in the SAI.
High-Risk Debt Securities. The Funds are authorized to invest in debt securities
rated in any category by S&P or Moody's and securities which are unrated by any
rating agency. See "How Do the Funds Invest Their Assets? - Debt
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Securities." in the SAI. As an operating policy, which may be changed by the
Board without shareholder approval, a Fund will not invest more than 5% of its
total assets in debt securities rated lower than BBB by S&P or Baa by Moody's.
The Board may consider a change in this operating policy if, in its judgment,
economic conditions change such that a higher level of investment in high-risk,
lower quality debt securities would be consistent with the interests of a Fund
and its shareholders. See "How Do the Funds Invest Their Assets? - Debt
Securities." in the SAI for descriptions of debt securities rated BBB by S&P and
Baa by Moody's. High-risk, lower quality debt securities, commonly referred to
as "junk bonds," are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation and may be in default. Unrated debt
securities are not necessarily of lower quality than rated securities, but they
may not be attractive to as many buyers. Regardless of rating levels, all debt
securities considered for purchase (whether rated or unrated) will be carefully
analyzed by each Investment Manager to insure, to the extent possible, that the
planned investment is sound. Each Fund may, from time to time, invest up to 5%
of its total assets in defaulted debt securities if, in the opinion of the
Investment Manager, the issuer may resume interest payments in the near future.
Leverage. Leveraging by means of borrowing may exaggerate the effect of any
increase or decrease in the value of portfolio securities on a Fund's net asset
value, and money borrowed will be subject to interest and other costs (which
may include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds. The use of leverage may significantly increase a
Fund's investment risk.
Futures Contracts and Related Options. Successful use of futures contracts and
related options is subject to special risk considerations. A liquid secondary
market for any futures or options contract may not be available when a futures
or options position is sought to be closed. In addition, there may be an
imperfect correlation between movements in the securities or foreign currency
on which the futures or options contract is based and movements in the
securities or currency in a Fund's portfolio. Successful use of futures or
options contracts is further dependent on an Investment Manager's ability to
correctly predict movements in the securities or foreign currency markets, and
no assurance can be given that its judgment will be correct. Successful use of
options on securities or indices is subject to similar risk considerations. In
addition, by writing covered call options, a Fund gives up the opportunity,
while
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the option is in effect, to profit from any price increase in the underlying
security above the option exercise price.
There are further risk factors, including possible losses through the holding of
securities in domestic and foreign custodian banks and depositories, described
elsewhere in this prospectus and in the SAI.
WHO MANAGES THE FUNDS?
The Board. The Board oversees the management of the Funds and elects the
Trust's officers. The officers are responsible for the Funds' day-to-day
operations. The Board also monitors the Funds to ensure that no material
conflicts exist among the classes of shares. While none is expected, the Board
will act appropriately to resolve any material conflict that may arise.
Investment Managers. Investment Managers manage the Funds' assets and make the
Funds' investment decisions. Investment Managers also perform similar services
for other funds. The Investment Managers are wholly owned by Resources, a
publicly owned company engaged in the financial services industry through its
subsidiaries. Charles B. Johnson and Rupert H. Johnson, Jr. are the principal
shareholders of Resources. Together, the Investment Managers and their
affiliates manage over $172 billion in assets. The Templeton organization has
been investing globally since 1940. The Investment Managers and their affiliates
have offices in Argentina, Australia, Bahamas, Canada, France, Germany, Hong
Kong, India, Italy, Luxembourg, Poland, Russia, Scotland, Singapore, South
Africa, U.S., and Vietnam. Please see "Investment Management and Other
Services" and "Miscellaneous Information" in the SAI for information on
securities transactions and a summary of the Trust's Code of Ethics.
Portfolio Management. Greater European Fund is managed by Jeffrey A. Everett,
Richard Sean Farrington and Mark G. Holowesko since 1996. Mr. Everett is an
executive vice president of the Investment Manager. He holds a BS in finance
from Pennsylvania State University and is also a Chartered Financial Analyst. He
joined the Templeton organization in 1989 and is responsible for managing
several offshore accounts at Templeton, as well as several Templeton funds. Mr.
Everett's global research responsibilities encompass industry coverage for
broadcasting, advertising, publishing and real estate, and country
responsibilities for Italy and Australia. Prior to joining the Templeton
organization, Mr. Everett was an investment officer at First Pennsylvania
Investment Research, a division of First Pennsylvania Corporation, where he
analyzed equity and convertible securities. He also coordinated research for
Centre Square Investment Group, the pension management subsidiary of First
Pennsylvania Corporation. Mr. Farrington is a vice president of the Investment
Manager. He holds a BA in
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economics from Harvard University. Mr. Farrington is a Chartered Financial
Analyst and is currently the president of the Bahamas Society of Financial
Analysts. He joined the Templeton organization in 1991 and is currently a
research analyst and portfolio manager. Mr. Farrington's current research
responsibilities include global industry coverage of the electrical equipment
industries, as well as non-U.S. electric utilities. He is also responsible for
country coverage of Hong Kong, China and Taiwan. Mr. Holowesko is president of
the Investment Manager. He holds a BA in economics from Holy Cross College and
an MBA from Babson College. He is a Chartered Financial Analyst, Chartered
Investment Counselor, and a director and founding member of the International
Society of Financial Analysts. Prior to joining the Templeton organization, Mr.
Holowesko worked with RoyWest Trust Corporation (Bahamas) Limited as an
investment analyst. His duties at RoyWest included managing trust and
individual accounts, as well as equity market research worldwide. Mr. Holowesko
is responsible for coordinating equity research worldwide for the Investment
Manager and managing several mutual funds.
The lead portfolio manager of Latin America Fund since July 1996 is Stephen S.
Oler. Mr. Oler is vice president of Latin America Fund's Investment Manager. He
holds a BA in American history from the University of Pennsylvania and a master
of philosophy in international relations from King's College at Cambridge
University. Mr. Oler is a Chartered Financial Analyst and a member of the
Association for Investment Management and Research. Prior to joining the
Templeton organization in March 1996, Mr. Oler was a global portfolio manager
and senior vice president of Baring Asset Management, Inc. During his 11 years
with Baring Asset Management, Inc., Mr. Oler managed several Latin American
funds and Latin American portions of global emerging markets funds. His current
research responsibilities include industry coverage of global non-life
insurance, as well as the markets of Mexico and Greece.
Mark R. Beveridge and Howard S. Leonard exercise secondary portfolio management
responsibilities for Latin America Fund. Mr. Beveridge is vice president of
Latin America Fund's Investment Manager. He holds a BBA in finance from the
University of Miami. He is a Chartered Financial Analyst, a Chartered
Investment Counselor and a member of the South Florida Society of Financial
Analysts and the International Society of Financial Analysts. Before joining
the Templeton organization in 1985 as a security analyst, Mr. Beveridge was a
principal with a financial accounting software firm based in Miami, Florida. He
is currently a portfolio manager and research analyst with responsibility for
the industrial component and appliances/household durables industries. He also
has market coverage of Argentina, Thailand and Denmark.
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Mr. Leonard is executive vice president of Latin America Fund's Investment
Manager. He holds a BBA degree in finance and economics from the Temple
University. He is a Chartered Financial Analyst and a member of the Financial
Analysts of Philadelphia, the Financial Analysts Federation and the
International Society of Security Analysts. Before joining the Templeton
organization in 1989, Mr. Leonard was director of investment research at First
Pennsylvania Bank, where he was responsible for equity and fixed-income
research activities. Mr. Leonard also worked previously at Provident National
Bank as a security analyst covering a variety of industries. He currently
manages both institutional and mutual fund accounts of global and international
mandates. Mr. Leonard has research responsibility for the global forest
products and money managers industries and is responsible for country coverage
of Indonesia, Switzerland, Brazil and India.
Management Fees. For the fiscal year ended March 31, 1996, the Funds paid no
management fees (0.00% of average daily net assets). The Investment Managers
voluntarily agreed to reduce their fees in order to limit total expenses of the
Funds. Without this voluntary agreement, management fees would have been 0.75%
of Greater European Fund's average daily net assets and 1.25% of Latin America
Fund's average daily net assets. After August 1, 1997, these agreements may end
at any time upon notice to the Board.
Portfolio Transactions. The Investment Managers try to obtain the best execution
on all transactions. If an Investment Manager believes more than one broker or
dealer can provide the best execution, consistent with internal policies it may
consider research and related services and the sale of Fund shares, as well as
shares of other funds in the Franklin Templeton Group of Funds, when selecting
a broker or dealer. Please see "How Do the Funds Buy Securities For Their
Portfolios?" in the SAI for more information.
Administrative Services. FT Services (and, prior to October 1, 1996, Templeton
Global Investors, Inc.) provides certain administrative services and facilities
for the Funds. Please see "Investment Management and Other Services" in the SAI
for more information.
HOW DO THE FUNDS MEASURE PERFORMANCE?
From time to time, each class of each Fund advertises its performance. The more
commonly used measure of performance is total return. Performance figures are
usually calculated using the maximum sales charge, if applicable. Certain
performance figures may not include any applicable sales charge or Rule 12b-1
fees.
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Total return is the change in value of an investment over a given period. It
assumes any dividends and capital gains are reinvested.
The investment results of each class will vary. Performance figures are always
based on past performance and do not guarantee future results. For a more
detailed description of how the Funds calculate their performance figures,
please see "How Do the Funds Measure Performance?" in the SAI.
HOW IS THE TRUST ORGANIZED?
Each Fund is a diversified series of the Trust, an open-end management
investment company, commonly called a mutual fund. The Trust was organized as a
business trust under the laws of Delaware on December 21, 1993, and is
registered with the SEC under the 1940 Act. In addition to the Funds, the Trust
has three other series of shares: Templeton Americas Government Securities
Fund, a non-diversified fund, and Templeton Growth and Income Fund and
Templeton Global Infrastructure Fund, both diversified funds. Prospectuses for
Templeton Americas Government Securities Fund, Templeton Growth and Income Fund
and Templeton Global Infrastructure Fund are available upon request and without
charge from Distributors. Each Fund discussed in this prospectus has three
classes of shares of beneficial interest with a par value of $.01: Greater
European Fund - Class I, Greater European Fund - Class II, and Greater European
Fund Advisor Class; Latin America Fund - Class I, Latin America Fund - Class
II, and Latin America Fund - Advisor Class. The Trust began offering Advisor
Class shares of each Fund on January 1, 1997. Class I, Class II and Advisor
Class shares differ as to sales charges, expenses and services. Different fees
and expenses will affect performance. Additional classes and series may be
offered in the future. A further description of Class I and Class II is set
forth below.
Each class will vote separately on matters (1) affecting only that class, (2)
expressly required to be voted on separately by state law, or (3) required to
be voted on separately by the 1940 Act. Shares of each class of a series
represent proportionate interest in the assets of the series and have the same
voting and other rights and preferences as any other class and series of the
Trust on matters that affect the Trust as a whole.
The Trust has noncumulative voting rights. This gives holders of more than 50%
of the shares voting the ability to elect all of the members of the Board. If
this happens, holders of the remaining shares voting will not be able to elect
anyone to the Board.
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The Trust does not intend to hold annual shareholder meetings. It may hold a
special meeting of a series, however, for matters requiring shareholder approval
under the 1940 Act. The Trust will call a special meeting of shareholders for
the purpose of considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than 10% of the
Trust's outstanding shares. The 1940 Act requires that we help you communicate
with other shareholders in connection with electing or removing members of the
Board.
Class I and Class II. Class I and Class II shares of the Funds are described in
a separate prospectus relating only to those classes. You may buy Class I and
Class II shares through your investment representative or directly by contacting
the Trust. If you would like a prospectus relating to the Funds' Class I and
Class II shares, contact your investment representative or Distributors.
Class I and Class II shares of the Funds have sales charges and Rule 12b-1
charges that may affect performance. Class I shares have a front-end sales
charge of 5.75% (6.10% of the net amount invested) which is reduced on certain
transactions of $50,000 or more. Class I shares are subject to Rule 12b-1 fees
up to a maximum of 0.35% per year of Class I's average daily net assets. Class
II shares have a front-end sales charge of 1.00% (1.01% of the net amount
invested) and are subject to Rule 12b-1 fees up to a maximum of 0.75% per year
of Class II's average daily net assets. Shares of Class I may be subject to, and
shares of Class II are generally subject to, a Contingent Deferred Sales Charge
upon redemption.
HOW TAXATION AFFECTS YOU AND THE FUNDS
The following discussion reflects some of the tax considerations that affect
mutual funds and their shareholders. For more information on tax matters
relating to the Funds and their shareholders, see "Additional Information on
Distributions and Taxes" in the SAI.
Each Fund intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. A regulated investment
company generally is not subject to federal income tax on income and gains
distributed in a timely manner to its shareholders. Each Fund intends to
distribute to shareholders substantially all of its net investment income and
realized capital gains, which generally will be taxable income or capital gains
in their hands. Distributions declared in October, November or December to
shareholders of record on a date in such month and paid during the following
January will be treated as having been received by shareholders on December 31
in the year such distributions were declared. The Trust will inform shareholders
each year of the amount and nature of such income or gains. Sales or other
dispositions of Fund shares generally will give rise to taxable gain or loss.
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ABOUT YOUR ACCOUNT
HOW DO I BUY SHARES?
Opening Your Account
You may buy Advisor Class shares if you are making a minimum initial investment
of $5 million (in the aggregate) in one or more Advisor Class shares of the
Franklin Templeton Funds ($25 for subsequent investments) or if you are an
investor in one of the following categories:
(a) Broker-dealers, qualified registered investment advisors or certified
financial planners, who have entered into a supplemental agreement with
Distributors for clients participating in comprehensive fee programs;
(b) Qualified registered investment advisors or registered certified financial
planners who have clients invested in Mutual Series on October 31, 1996;
(c) Qualified registered investment advisors or registered certified financial
planners who did not have clients invested in Mutual Series on October 31,
1996 may buy through a broker-dealer or service agent who has entered into
an agreement with Distributors;
(d) Employer stock, bonus, pension or profit-sharing plans that meet the
requirements for qualification under Section 401 of the Code, including
salary reduction plans qualified under Section 401(k) of the Code (if they
have 5,000 or more employees or the plan has assets of $50 million or more);
(e) Effective on or about February 1, 1997, participants in Franklin Templeton's
401(k) and any Franklin Templeton Group Company Profit Sharing Plans;
(f) Trust companies and bank trust departments initially investing in any of the
Franklin Templeton Funds at least $1 million of assets held in a fiduciary,
agency, advisory, custodial or similar capacity and over which the trust
companies, bank trust departments or other plan fiduciaries or participants,
in the case of certain retirement plans, have full or shared investment
discretion;
(g) Governments, municipalities and tax-exempt entities that meet the
requirements for qualification under Section 501 of the Code (subject to an
initial investment in Advisor Class of $1 million);
(h) Any other investor, including a private investment vehicle such as a family
trust or foundation, who is a member of a qualified group may also
Templeton Region Funds -
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purchase Advisor Class shares of the Funds if the group as a whole meets the
required minimum initial investment of $5 million;
(i) Directors, trustees, officers and full-time employees (and members of their
immediate families) of Franklin Templeton Group and Franklin Templeton Group
of Funds who invest $100 or more;
(j) Accounts managed by the Franklin Templeton Group;
(k) Class I shareholders of the Funds who qualify under one of the above
categories, may have their existing Class I shares invested into the Funds'
Advisor Class by sending written instructions indicating that they wish to do
so, by June 30, 1997. Instructions should be addressed to Investor Services.
Generally, for federal income tax purposes, there will be no recognition of
gain or loss associated with such a transaction. You may wish to consult with
your tax advisor to determine whether there are any state income tax
consequences to such a transaction.
(l) Each series of Franklin Templeton Fund Allocator Series that invests $1,000
or more.
The qualified group referred to in Item (h) above, is one that:
- - Was formed at least six months ago,
- - Has a purpose other than buying Fund shares at a discount,
- - Has more than 10 members,
- - Can arrange for meetings between our representatives and group members,
- - Agrees to include sales and other Franklin Templeton Fund materials in
publications and mailings to its members at reduced or no cost to
Distributors,
- - Agrees to arrange for payroll deduction or other bulk transmission of
investments to the Fund, and
- - Meets other uniform criteria that allow Distributors to achieve cost savings
in distributing shares.
If you are subject to the $5 million minimum investment requirement, the cost
or current value (whichever is higher) of your investment in other funds in the
Franklin Templeton Funds will be included for purposes of determining
compliance with the required minimum investment amount, provided that at least
$1 million is invested in Advisor Class shares of the Franklin Templeton Funds.
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The minimum for subsequent investments in Advisor Class shares is $25 for most
purchases of Advisor Class shares of the Funds and for purchases by directors,
trustees, officers and full-time employees (and members of their immediate
family) of Franklin Templeton Group and Franklin Templeton Funds; and $1,000
for each series of Franklin Templeton Fund Allocator Series.
Purchase Price of Fund Shares
Advisor Class shares are purchased at Net Asset Value without a sales charge.
Securities Dealers may receive compensation up to 0.25% of the amount invested
from Distributors or an affiliated company.
How Do I Buy Shares in Connection with Retirement Plans?
Your individual or employer-sponsored retirement plan may invest in the Funds.
Plan documents are required for all retirement plans. Trust Company can provide
the plan documents for you and serve as custodian or trustee. Trust Company can
provide you with brochures containing important information about its plans. To
establish a Trust Company retirement plan, you will need an application other
than the one included in this prospectus. For a retirement plan brochure or
application, please call our Retirement Plans Department.
Please consult your legal, tax or retirement plan specialist before choosing a
retirement plan. Your investment representative or advisor can help you make
investment decisions within your plan.
MAY I EXCHANGE SHARES FOR SHARES OF ANOTHER FUND?
We offer a wide variety of funds. If you would like, you can move your
investment from your Fund account to an existing or new account in another
Franklin Templeton Fund (an "exchange"). Because it is technically a sale and a
purchase of shares, an exchange is a taxable transaction.
Before making an exchange, please read the prospectus of the fund you are
interested in. This will help you learn about the fund and its rules and
requirements for exchanges. For example, some Franklin Templeton Funds do not
accept exchanges and others may have different investment minimums. Some
Franklin Templeton Funds do not offer Advisor Class shares.
Templeton Region Funds -
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<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- --------------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners
2. Include any outstanding share certificates for
the shares you're exchanging
- --------------------------------------------------------------------------
BY PHONE Call Shareholder Services
(If you do not want the ability to exchange by
phone to apply to your account, please let us
know.)
- --------------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative
- --------------------------------------------------------------------------
</TABLE>
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to exchange shares.
How We Process Your Exchange
If you are exchanging your Advisor Class shares of the Fund you may:
- - exchange into any of our money funds except Franklin Templeton Money Fund II.
- - exchange into the other Advisor Class shares of the Franklin Templeton Funds
(excluding Templeton Developing Markets Trust, Templeton Foreign Fund and
Templeton Growth Fund, Inc., except as described below), Mutual Series Class
Z shares and Templeton Institutional Funds, Inc., if you meet the investment
requirements of the fund to be acquired.
- - exchange into the Advisor Class shares of Templeton Developing Markets Trust,
Templeton Foreign Fund and Templeton Growth Fund, Inc. only if you fall into
one of the following categories: (i) you are a broker-dealer or a qualified
registered investment advisor who has entered into a special agreement with
Distributors for your clients who are participating in comprehensive fee
programs; (ii) you are a qualified registered investment advisor or certified
financial planner who has clients invested in Mutual Series on October 31,
1996; (iii) qualified registered investment advisors or registered certified
financial planners who did not have clients invested in Mutual Series on
October 31, 1996 may buy through a broker-dealer or service agent who has
entered into an agreement with Distributors; (iv) you are a director, trustee,
officer or full-time employee (or a family member) of the Franklin Templeton
Group or the Franklin Templeton Funds; (v) you are a participant in Franklin
Templeton's 401(k) or Franklin Templeton's Profit Sharing Plans; (vi) the
exchanging shareholder is an account managed by the Franklin Templeton
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Group; or (vii) the exchanging shareholder is a series of the Franklin
Templeton Fund Allocator Series.
- - If the fund you are exchanging into does not offer Advisor Class shares, you
may exchange into the Class I shares of the fund at Net Asset Value.
Please be aware that the following restrictions may apply to exchanges:
- - The accounts must be identically registered. You may exchange shares from a
Fund account requiring two or more signatures into an identically registered
money fund account requiring only one signature for all transactions. Please
notify us in writing if you do not want this option to be available on your
account(s). Additional procedures may apply. Please see "Transaction
Procedures and Special Requirements."
- - Trust Company IRA or 403(b) retirement plan accounts may exchange shares as
described above. Restrictions may apply to other types of retirement plans.
Please contact our Retirement Plans Department for information on exchanges
within these plans.
- - The fund you are exchanging into must be eligible for sale in your state.
- - We may modify or discontinue our exchange policy upon 60 days' written notice.
- - Your exchange may be restricted or refused if you: (i) request an exchange out
of the Funds within two weeks of an earlier exchange request, (ii) exchange
shares out of the Funds more than twice in a calendar quarter, or (iii)
exchange shares equal to at least $5 million, or more than 1/4 of 1% of the
Fund's net assets. Shares under common ownership or control are combined for
these limits. If you exchange shares as described in this paragraph, you will
be considered a Market Timer. Each exchange by a Market Timer, if accepted,
will be charged $5.00. Some of our funds do not allow investments by Market
Timers.
Because excessive trading can hurt Fund performance and shareholders, we may
refuse any exchange purchase if (i) we believe the Fund would be harmed or
unable to invest effectively, or (ii) the Fund receives or anticipates
simultaneous orders that may significantly affect the Fund.
Templeton Region Funds -
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HOW DO I SELL SHARES?
You may sell (redeem) your shares at any time.
<TABLE>
<CAPTION>
METHOD STEPS TO FOLLOW
- ----------------------------------------------------------------------
<S> <C>
BY MAIL 1. Send us written instructions signed by all
account owners.
2. Include any outstanding share certificates
for the shares you are selling.
3. Provide a signature guarantee if required.
4. Corporate, partnership and trust accounts
may need to send additional documents.
Accounts under court jurisdiction may have
additional requirements.
- ----------------------------------------------------------------------
BY PHONE Call Shareholder Services
(Only available if you have completed and sent to us the telephone
redemption agreement included with this prospectus)
Telephone requests will be accepted:
- If the request is $50,000 or less.
Institutional accounts may exceed $50,000 by
completing a separate agreement. Call
Institutional Services to receive a copy.
- If there are no share certificates issued
for the shares you want to sell or you have
already returned them to the respective Fund.
- Unless you are selling shares in a Trust
Company retirement plan account.
- Unless the address on your account was
changed by phone within the last 30 days.
Beginning on or about May 1, 1997, you will be
able to redeem shares by telephone without
completing a telephone redemption agreement.
Please notify us if you do not want this
option to be available on your account. If you
later decide you would like this option, send
us written instructions signed by all account
owners.
- ----------------------------------------------------------------------
THROUGH YOUR DEALER Call your investment representative.
- ----------------------------------------------------------------------
</TABLE>
We will send your redemption check within seven days after we receive your
request in proper form. If you sell your shares by phone, the check may only be
- Templeton Region Funds
28
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made payable to all registered owners on the account and sent to the address of
record. We are not able to receive or pay out cash in the form of currency.
If you sell shares you just purchased with a check or draft, we may delay
sending you the proceeds for up to 15 days or more to allow the check or draft
to clear. A certified or cashier's check may clear in less time.
Under unusual circumstances, we may suspend redemptions or postpone payment for
more than seven days as permitted by federal securities law.
Please refer to "Transaction Procedures and Special Requirements" for other
important information on how to sell shares.
Trust Company Retirement Plan Accounts
To comply with IRS regulations, you need to complete additional forms before
selling shares in a Trust Company retirement plan account. Tax penalties
generally apply to any distribution from these plans to a participant under age
59 1/2, unless the distribution meets an exception stated in the Code. To obtain
the necessary forms, please call our Retirement Plans Department.
WHAT DISTRIBUTIONS MIGHT I RECEIVE FROM THE FUNDS?
Dividends and capital gains are calculated and distributed the same way for each
class of each Fund. The amount of any income dividends per share will differ,
however, generally due to the difference in the applicable Rule 12b-1 fees of
any class. Advisor Class shares are not subject to Rule 12b-1 fees.
Each Fund intends to pay a dividend at least annually representing substantially
all of its net investment income and any net realized capital gains. Dividend
payments are not guaranteed, are subject to the Board's discretion and may vary
with each payment. FUNDS DO NOT PAY "INTEREST" OR GUARANTEE ANY FIXED RATE OF
RETURN ON AN INVESTMENT IN ITS SHARES.
If you buy shares shortly before the record date, please keep in mind that any
distribution will lower the value of a Fund's shares by the amount of the
distribution.
Distribution Options
You may receive your distributions from a Fund in any of these ways:
1. Buy additional shares of a Fund - You may buy additional shares of the same
class of a Fund by reinvesting capital gain distributions, dividend
distributions, or both. This is a convenient way to accumulate additional
shares and maintain or increase your earnings base.
Templeton Region Funds -
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2. Buy shares of other Franklin Templeton Funds - You may direct your
distributions to buy Advisor Class shares or Class I shares of another Franklin
Templeton Fund. Many shareholders find this a convenient way to diversify their
investments.
3. Receive distributions in cash - You may receive capital gain distributions,
dividend distributions, or both in cash. If you have the money sent to another
person or to a checking account, you may need a signature guarantee.
TO SELECT ONE OF THESE OPTIONS, PLEASE COMPLETE THE SHAREHOLDER APPLICATION
INCLUDED WITH THIS PROSPECTUS OR TELL YOUR INVESTMENT REPRESENTATIVE WHICH
OPTION YOU PREFER. IF YOU DO NOT SELECT AN OPTION, WE WILL AUTOMATICALLY
REINVEST DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS IN THE ADVISOR CLASS SHARES OF
THE RESPECTIVE FUND. For Trust Company retirement plans, special forms are
required to receive distributions in cash. You may change your distribution
option at any time by notifying us by mail or phone. Please allow at least seven
days prior to the record date for us to process the new option.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
How and When Shares Are Priced
Each Fund is open for business each day the NYSE is open. We determine the Net
Asset Value per share of each class as of the scheduled close of the NYSE,
generally 4:00 p.m. Eastern time. You can find the prior day's closing Net Asset
Value and Offering Price for each class in many newspapers.
The Net Asset Value of all outstanding shares of each class is calculated on a
pro rata basis. It is based on each class' proportionate participation in a
Fund, determined by the value of the shares of each class. To calculate Net
Asset Value per share of each class, the assets of each class are valued and
totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares of the class outstanding. Each Fund's assets
are valued as described under "How Are Fund Shares Valued?" in the SAI.
The Price We Use When You Buy or Sell Shares
You buy shares of Advisor Class at the Net Asset Value per share. We calculate
it to two decimal places using standard rounding criteria. You also sell shares
at Net Asset Value.
We will use the Net Asset Value next calculated after we receive your
transaction request in proper form. If you buy or sell shares through your
Securities Dealer, however, we will use the Net Asset Value next calculated
after your Securities Dealer receives your request, which is promptly
transmitted to a Fund. Your
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30
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redemption proceeds will not earn interest between the time we receive the order
from your dealer and the time we receive any required documents.
Proper Form
An order to buy shares is in proper form when we receive your signed
shareholder application and check. Written requests to sell or exchange shares
are in proper form when we receive written instructions signed by all registered
owners, with a signature guarantee if necessary. We must also receive any
outstanding share certificates for those shares.
Written Instructions
Written instructions must be signed by all registered owners. To avoid any delay
in processing your transaction, they should include:
- - Your name,
- - The respective Fund's name,
- - The class of shares,
- - A description of the request,
- - For exchanges, the name of the fund you're exchanging into,
- - Your account number,
- - The dollar amount or number of shares, and
- - A telephone number where we may reach you during the day, or in the evening
if preferred.
Signature Guarantees
For our mutual protection, we require a signature guarantee in the following
situations:
1) You wish to sell over $50,000 worth of shares,
2) You want the proceeds to be paid to someone other than the registered owners,
3) The proceeds are not being sent to the address of record, preauthorized bank
account, or preauthorized brokerage firm account,
4) We receive instructions from an agent, not the registered owners,
5) We believe a signature guarantee would protect us against potential claims
based on the instructions received.
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A signature guarantee verifies the authenticity of your signature and may be
obtained from certain banks, brokers or other eligible guarantors. YOU SHOULD
VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR PRIOR TO SIGNING. A
NOTARIZED SIGNATURE IS NOT SUFFICIENT.
Share Certificates
We will credit your shares to your Fund account. We do not issue share
certificates unless you specifically request them. This eliminates the costly
problem of replacing lost, stolen or destroyed certificates. If a certificate
is lost, stolen or destroyed, you may have to pay an insurance premium of up to
2% of the value of the certificate to replace it.
Any outstanding share certificates must be returned to the respective Fund if
you want to sell or exchange those shares or if you would like to start a
systematic withdrawal plan. The certificates should be properly endorsed. You
can do this either by signing the back of the certificate or by completing a
share assignment form. For your protection, you may prefer to complete a share
assignment form. In this case, you should send the certificate and assignment
form in separate envelopes.
Telephone Transactions
You may initiate many transactions by phone. Please refer to the sections of
this prospectus that discuss the transaction you would like to make or call
Shareholder Services.
When you call, we will request personal or other identifying information to
confirm that instructions are genuine. We will also record calls. We will not be
liable for following instructions communicated by telephone if we reasonably
believe they are genuine. For your protection, we may delay a transaction or not
implement one if we are not reasonably satisfied that the instructions are
genuine. If this occurs, we will not be liable for any loss.
Trust Company Retirement Plan Accounts. You may not sell shares or change
distribution options on Trust Company retirement plans by phone. While you may
exchange shares of Trust Company IRA and 403(b) retirement accounts by phone,
certain restrictions may be imposed on other retirement plans.
To obtain any required forms or more information about distribution or transfer
procedures, please call our Retirement Plans Department.
Account Registrations and Required Documents
When you open an account, you need to tell us how you want your shares
registered. How you register your account will affect your ownership rights and
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32
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ability to make certain transactions. If you have questions about how to
register your account, you should consult your investment representative or
legal advisor. Please keep the following information in mind when registering
your account.
Joint Ownership. If you open an account with two or more owners, we register
the account as "joint tenants with rights of survivorship" unless you tell us
otherwise. An account registered as "joint tenants with rights of survivorship"
is shown as "Jt Ten" on your account statement. For any account with two or
more owners, all owners must sign instructions to process transactions and
changes to the account. Even if the law in your state says otherwise, you will
not be able to change owners on the account unless all owners agree in writing.
If you would like another person or owner to sign for you, please send us a
current power of attorney.
Gifts and Transfers to Minors. You may set up a custodial account for a minor
under your state's Uniform Gifts/Transfers to Minors Act. Other than this form
of registration, a minor may not be named as an account owner.
Trusts. If you register your account as a trust, you should have a valid written
trust document to avoid future disputes or possible court action over who owns
the account.
Required Documents. For corporate, partnership and trust accounts, please send
us the following documents when you open your account. This will help avoid
delays in processing your transactions while we verify who may sign on the
account.
<TABLE>
<CAPTION>
TYPE OF ACCOUNT DOCUMENTS REQUIRED
- -----------------------------------------------------------------------
<S> <C>
CORPORATION Corporate Resolution
- -----------------------------------------------------------------------
PARTNERSHIP 1. The pages from the partnership agreement that
identify the general partners, or
2. A certification for a partnership agreement
- -----------------------------------------------------------------------
TRUST 1. The pages from the trust document that
identify the trustees, or
2. A certification for trust
- -----------------------------------------------------------------------
</TABLE>
Street or Nominee Accounts. If you have Fund shares held in a "street" or
"nominee" name account with your Securities Dealer, you may transfer the shares
to the street or nominee name account of another Securities Dealer. Both
dealers must have an agreement with Distributors or we will not process the
transfer. Contact your Securities Dealer to initiate the transfer. We will
process the transfer after we receive authorization in proper form from your
delivering
Templeton Region Funds -
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Securities Dealer. Accounts may be transferred electronically through the NSCC.
For accounts registered in street or nominee name, we may take instructions
directly from the Securities Dealer or your nominee.
Electronic Instructions. If there is a Securities Dealer or other
representative of record on your account, we are authorized to use and execute
electronic instructions received directly from your dealer or representative
without further inquiry. Electronic instructions may be processed through the
services of the NSCC, which currently include the NSCC's "Networking,"
"Fund/SERV," and "ACATS" systems, or through Franklin/Templeton's PCTrades
II(TM) System.
Tax Identification Number
For tax reasons, we must have your correct Social Security or tax identification
number on a signed shareholder application or applicable tax form. Federal law
requires us to withhold 31% of your taxable distributions and sale proceeds if
(i) you have not furnished a certified correct taxpayer identification number,
(ii) you have not certified that withholding does not apply, (iii) the IRS or a
Securities Dealer notifies a Fund that the number you gave us is incorrect, or
(iv) you are subject to backup withholding.
We may refuse to open an account if you fail to provide the required tax
identification number and certifications. We may also close your account if the
IRS notifies us that your tax identification number is incorrect. If you
complete an "awaiting TIN" certification, we must receive a correct tax
identification number within 60 days of your initial purchase to keep your
account open.
Keeping Your Account Open
Due to the relatively high cost of maintaining a small account, we may close
your account if the value of your shares is $50 or less, except for investors in
categories (d), (e), (j) and (l) under "Opening Your Account." We will only do
this if the value of your account falls below this minimum because you
voluntarily sold your shares and your account has been inactive (except for the
reinvestment of distributions) for at least six months. Before we close your
account, we will notify you and give you 30 days to increase the value of your
account to the required minimum amount of at least $100.
SERVICES TO HELP YOU MANAGE YOUR ACCOUNT
Automatic Investment Plan
Our automatic investment plan offers a convenient way to invest in a Fund.
Under the plan, you can have money transferred automatically from your checking
account to the respective Fund each month to buy additional shares. If
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34
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you are interested in this program, please refer to the account application
included with this prospectus or contact your investment representative. The
market value of a Fund's shares may fluctuate and a systematic investment plan
such as this will not assure a profit or protect against a loss. You may
discontinue the program at any time by notifying Investor Services by mail or
phone.
Systematic Withdrawal Plan
Our systematic withdrawal plan allows you to sell your shares and receive
regular payments from your account on a monthly, quarterly, semiannual or annual
basis. The value of your account must be at least $5,000 and the minimum
payment amount for each withdrawal must be at least $50. For retirement plans
subject to mandatory distribution requirements, the $50 minimum will not apply.
If you would like to establish a systematic withdrawal plan, please complete the
systematic withdrawal plan section of the shareholder application included with
this prospectus and indicate how you would like to receive your payments. You
may choose to direct your payments to buy the same class of shares of another
Franklin Templeton Fund or have the money sent directly to you, to another
person, or to a checking account.
You will generally receive your payment by the end of the month in which a
payment is scheduled. When you sell your shares under a systematic withdrawal
plan, it is a taxable transaction.
You may discontinue a systematic withdrawal plan, change the amount and
schedule of withdrawal payments, or suspend one payment by notifying us in
writing at least seven business days before the end of the month preceding a
scheduled payment. Please see "How Do I Buy, Sell and Exchange Shares? -
Systematic Withdrawal Plan" in the SAI for more information.
Statements and Reports to Shareholders
We will send you the following statements and reports on a regular basis:
- - Confirmation and account statements reflecting transactions in your account,
including additional purchases and dividend reinvestments. Please verify the
accuracy of your statements when you receive them.
- - Financial reports of each Fund will be sent every six months. To reduce Fund
expenses, we attempt to identify related shareholders within a household and
send only one copy of a report. Call Fund Information if you would like an
additional free copy of a Fund's financial report or an interim quarterly
report.
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Brokers and Dealers and Plan Administrators
You may buy and sell Fund shares through registered broker-dealers. The Funds
do not impose a sales or service charge but your broker-dealer may charge you a
transaction fee. Transaction fees and services may vary among broker-dealers,
and your broker-dealer may impose higher initial or subsequent investment
requirements than those established by the Funds. Services provided by broker-
dealers may include allowing you to establish a margin account and borrow on
the value of a Fund's shares in that account. If your broker-dealer receives
your order before pricing on a given day, the broker-dealer is required to
forward the order to the Fund before pricing closes on that day. A
broker-dealer's failure to timely forward an order may give rise to a claim by
the investor against the broker.
Third party plan administrators of tax-qualified retirement plans and other
entities may provide sub-transfer agent services to a Fund. In such cases, the
Fund may pay the third party an annual sub-transfer agency fee that is not
greater than the Fund otherwise would have paid for such services.
Institutional Accounts
Institutional investors will likely be required to complete an institutional
account application. There may be additional methods of opening accounts and
purchasing, redeeming or exchanging shares of the Funds available for
institutional accounts. To obtain an institutional application or additional
information regarding institutional accounts, contact Franklin Templeton
Institutional Services at 1-800/321-8563 Monday through Friday, from 9:00 a.m.
to 5:00 p.m. Eastern time.
Availability of These Services
The services above are available to most shareholders. If, however, your shares
are held by a financial institution, in a street name account, or networked
through the NSCC, the Funds may not be able to offer these services directly to
you. Please contact your investment representative.
What If I Have Questions About My Account?
If you have any questions about your account, you may write to Investor
Services at P.O. Box 33030, St. Petersburg, FL 33733-8030. Each Fund and
Distributors are also located at this address. You may also contact us by phone
at one of the numbers listed below.
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<TABLE>
<CAPTION>
HOURS OF OPERATION (EASTERN
TIME)
DEPARTMENT NAME TELEPHONE NO. (MONDAY THROUGH FRIDAY)
- ------------------------------------------------------------------------
<S> <C> <C>
Shareholder Services 1-800/632-2301 8:30 a.m. to 8:00 p.m.
Dealer Services 1-800/524-4040 8:30 a.m. to 8:00 p.m.
Fund Information 1-800/DIAL BEN 8:30 a.m. to 11:00 p.m.
9:30 a.m. to 5:30 p.m.
(1-800/342-5236) (Saturday)
Retirement Plans 1-800/527-2020 8:30 a.m. to 8:00 p.m.
Institutional Services 1-800/321-8563 9:00 a.m. to 8:00 p.m.
TDD (hearing impaired) 1-800/851-0637 8:30 a.m. to 8:00 p.m.
</TABLE>
Your phone call may be monitored or recorded to ensure we provide you with high
quality service. You will hear a regular beeping tone if your call is being
recorded.
Templeton Region Funds -
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GLOSSARY
USEFUL TERMS AND DEFINITIONS
1933 Act - Securities Act of 1933, as amended
1940 Act - Investment Company Act of 1940, as amended
Board - The Board of Trustees of the Trust
CD - Certificate of deposit
Class I, Class II and Advisor Class - Each Fund offers three classes of shares,
designated "Class I," "Class II" and "Advisor Class." The three classes have
proportionate interests in the respective Fund's portfolio. Class I and Class II
differ, however, primarily in their sales charge structures and Rule 12b-1
plans. Advisor Class shares are purchased without a sales charge and do not
have a Rule 12b-1 plan.
Code - Internal Revenue Code of 1986, as amended
Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the
contingency period is 18 months. Regardless of when during the month you
purchased shares, they will age one month on the last day of that month and
each following month.
Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply
if you sell your shares within the Contingency Period.
Distributors - Franklin/Templeton Distributors, Inc., each Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
Franklin Funds - the mutual funds in the Franklin Group of Funds(l) except
Franklin Valuemark Funds and the Franklin Government Securities Trust
Franklin Templeton Funds - The Franklin Funds and the Templeton Funds.
Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries.
Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R) and the Templeton Group of Funds.
FT Services - Franklin Templeton Services, Inc., each Fund's administrator.
- Templeton Region Funds
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Investment Manager - Templeton Global Advisors Limited, P.O. Box N-7759, Lyford
Cay, Nassau, Bahamas for Greater European Fund or Templeton Investment Counsel,
Inc., Broward Financial Centre, Fort Lauderdale, FL 33394-3091 for Latin
America Fund (collectively, the "Investment Managers.")
Investor Services - Franklin/Templeton Investor Services, Inc., each Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
Moody's - Moody's Investors Service, Inc.
Mutual Series - Franklin Mutual Series Fund Inc., a member of the Franklin
Group of Funds, formerly the Mutual Series Fund Inc. Each series of Mutual
Series began offering three classes of shares on November 1, 1996, Class I,
Class II and Class Z. All shares sold before that time are designated Class Z
shares.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - the value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The net asset
value per share is determined by dividing the net asset value of a Fund by the
number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange, Inc.
Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge, if applicable. The
maximum front-end sales charge is 5.75% for Class I and 1% for Class II.
Advisor Class has no front-end sales charge.
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Corporation
SEC - U.S. Securities and Exchange Commission
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Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with a Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
Templeton Funds - The U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund
Trust Company - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Funds and/or Investor Services, Distributors, or other wholly-owned
subsidiaries of Resources.
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INSTRUCTIONS AND IMPORTANT NOTICE
SUBSTITUTE W-9 INSTRUCTIONS INFORMATION
General. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
Obtaining a Number. If you do not have a Social Security Number/Taxpayer
Identification Number or you do not know your SSN/TIN, you must obtain Form
SS-5 or Form SS-4 from your local Social Security or IRS office and apply for
one. If you have checked the "Awaiting TIN" box and signed the certification,
withholding will apply to payments relating to your account unless you provide
a certified TIN within 60 days.
What SSN/TIN to Give. Please refer to the following guidelines:
<TABLE>
<CAPTION>
ACCOUNT TYPE GIVE SSN OF ACCOUNT TYPE GIVE EMPLOYER ID # OF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- -Individual Individual -Trust, Estate, or Trust, Estate, or
Pension Plan Trust Pension Plan Trust
- --------------------------------------------------------------------------------
- -Joint Individual Owner who will -Corporation, Corporation,
be paying tax Partnership, or Partnership, or
or first-named other organization other organization
individual
- --------------------------------------------------------------------------------
- -Unif. Gift/ Minor -Broker nominee Broker nominee
Transfer to Minor
- --------------------------------------------------------------------------------
- -Sole Proprietor Owner of
business
- --------------------------------------------------------------------------------
- -Legal Guardian Ward, Minor,
or Incompetent
- --------------------------------------------------------------------------------
</TABLE>
Exempt Recipients. Please provide your TIN and check the "Exempt Recipient" box
if you are an exempt recipient. Exempt recipients include:
A corporation
A financial institution
An organization exempt from tax under section 501(a), or an individual
retirement plan
A registered dealer in securities or commodities registered in the U.S. or a
U.S. possession
A real estate investment trust
A common trust fund operated by a bank under section 584(a)
Templeton Region Funds -
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An exempt charitable remainder trust or a non-exempt trust described in section
4947(a)(1)
An entity registered at all times under the Investment Company Act of 1940
IRS Penalties. If you do not supply us with your SSN/TIN, you will be subject to
an IRS $50 penalty unless your failure is due to reasonable cause and not
willful neglect. If you fail to report certain income on your federal income
tax return, you will be treated as negligent and subject to an IRS 20% penalty
on any underpayment of tax attributable to such negligence, unless there was
reasonable cause for the resulting underpayment and you acted in good faith. If
you falsify information on this form or make any other false statement
resulting in no backup withholding on an account which should be subject to
backup withholding, you may be subject to an IRS $500 penalty and certain
criminal penalties including fines and imprisonment.
SUBSTITUTE W-8 INSTRUCTIONS INFORMATION
Exempt Foreign Person. Check the "Exempt Foreign Person" box if you qualify as
a non-resident alien or foreign entity that is not subject to certain U.S.
information return reporting or to backup withholding rules. Dividends paid to
your account may be subject to withholding of up to 30%. You are an "Exempt
Foreign Person" if you are not (1) a citizen or resident of the U.S., or (2) a
U.S. corporation, partnership, estate, or trust. In the case of an individual,
an "Exempt Foreign Person" is one who has been physically present in the U.S.
for less than 31 days during the current calendar year. An individual who is
physically present in the U.S. for at least 31 days during the current calendar
year will still be treated as an "Exempt Foreign Person," provided that the
total number of days physically present in the current calendar year and the two
preceding calendar years does not exceed 183 days (counting all of the days in
the current calendar year, only one-third of the days in the first preceding
calendar year and only one-sixth of the days in the second preceding calendar
year). In addition, lawful permanent residents or green card holders may not be
treated as "Exempt Foreign Persons." If you are an individual or an entity, you
must not now be, or at this time expect to be, engaged in a U.S. trade or
business with respect to which any gain derived from transactions effected by
the Fund/Payer during the calendar year is effectively connected to the U.S.
(or your transactions are exempt from U.S. taxes under a tax treaty).
Permanent Address. The Shareholder Application must contain your permanent
address if you are an "Exempt Foreign Person." If you are an individual, provide
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your permanent address. If you are a partnership or corporation, provide the
address of your principal office. If you are an estate or trust, provide the
address of your permanent residence or the principal office of any fiduciary.
Notice of Change in Status. If you become a U.S. citizen or resident after you
have provided certification of your foreign status, or if you cease to be an
"Exempt Foreign Person," you must notify the Fund/Payer within 30 days of your
change in status. Reporting will then begin on the account(s) listed, and
backup withholding may also begin unless you certify to the Fund/Payer that (1)
the taxpayer identification number you have given is correct, and (2) the
Internal Revenue Service has not notified you that you are subject to backup
withholding because you failed to report certain interest or dividend income.
You may use Form W-9, "Payer's Request for Taxpayer Identification Number and
Certification," to make these certifications. If an account is no longer active,
you do not have to notify a Fund/Payer or broker of your change in status
unless you also have another account with the same Fund/Payer that is still
active. If you receive interest from more than one Fund/Payer or have dealings
with more than one broker or barter exchange, file a certificate with each. If
you have more than one account with the same Fund/Payer, the Fund/Payer may
require you to file a separate certificate for each account.
When to File. File these certifications with the Fund before a payment is made
to you, unless you have already done this in either of the two preceding
calendar years.
How Often You Must File. This certificate generally remains in effect for three
calendar years. A Fund/Payer or broker, however, may require that a new
certificate be filed each time a payment is made. On joint accounts for which
each joint owner is a foreign person, each must provide a certification of
foreign status.
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FOR CORPORATE SHAREHOLDERS--FORM OF RESOLUTION
It will be necessary for corporate shareholders to provide a certified copy of a
resolution or other certificate of authority to authorize the purchase as well
as sale (redemption) of shares and withdrawals by checks or drafts. You may use
the following form of resolution or you may prefer to use your own. It is
understood that the Fund, Franklin Templeton Distributors, Inc., Franklin
Templeton Investor Services, Inc., the custodian bank and their affiliates may
rely upon these authorizations until revoked or amended by written notice
delivered by registered or certified mail to the Fund.
CERTIFIED COPY OF RESOLUTION (Corporation or Association)
The undersigned hereby certifies and affirms that he/she is the duly elected
of
Title Corporate Name
a _______________________________ organized under the laws of the State of
Type of Organization
___________________ and that the following is a true and correct copy
State
of a resolution adopted by the Board of Directors at a meeting duly called and
held on __________________________
Date
RESOLVED, that the
Officers' Titles
of this Corporation or Association are authorized to open an account in
the name of the Corporation or Association with one or more of the
Franklin Group of Funds or Templeton Family of Funds (collectively, the
"Funds") and to deposit such funds of this Corporation or Association in
this account as they deem necessary or desirable; that the persons
authorized below may endorse checks and other instruments for deposit to
said account or accounts; and
FURTHER RESOLVED, that any of the following __________ officers are
number
authorized to sign any share assignment on behalf of this Corporation or
Association and to take any other actions as may be necessary to sell or
redeem its shares in the Funds or to sign checks or drafts withdrawing
funds from the account; and
FURTHER RESOLVED, that this Corporation or Association shall hold
harmless, indemnify, and defend the Funds, their custodian bank, Franklin
Templeton Distributors, Inc., Franklin Templeton Investor Services, Inc.,
and their affiliates, from any claim, loss or liability resulting in whole
or in
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part, directly or indirectly, from their reliance from time to time upon
any certifications by the secretary or any assistant secretary of this
Corporation or Association as to the names of the individuals occupying
such offices and their acting in reliance upon these resolutions until
actual receipt by them of a certified copy of a resolution of the Board of
Directors of the Corporation or Association modifying or revoking any or
all such resolutions.
The undersigned further certifies that the below named persons, whose
signatures appear opposite their names and office titles, are duly elected
officers of the Corporation or Association. (Attach additional list if
necessary.)
<TABLE>
<S> <C>
- --------------------------------------- ---------------------------------------
name/title (please print or type) Signature
- --------------------------------------- ---------------------------------------
name/title (please print or type) Signature
- --------------------------------------- ---------------------------------------
name/title (please print or type) Signature
- --------------------------------------- ---------------------------------------
name/title (please print or type) Signature
- --------------------------------------- ---------------------------------------
Name of Corporation or Association Date
</TABLE>
Certified from minutes
Name and Title
CORPORATE SEAL (if appropriate)
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FRANKLIN TEMPLETON
TELEPHONE REDEMPTION AUTHORIZATION
AGREEMENT
You may use Franklin Templeton's telephone redemption privilege to redeem
uncertificated Franklin Templeton Fund shares for up to $50,000 (or your
shareholder account balance, whichever is less) per day, per fund account in
accordance with the terms of the Funds' prospectus.
The telephone redemption privilege is available only to shareholders who
specifically request it. If you would like to add this redemption privilege to
the other telephone transaction privileges now automatically available to
Franklin Templeton Fund shareholders, please sign and return this authorization
to Franklin/Templeton Investor Services, Inc. ("Investor Services"), transfer
agent and shareholder servicing agent for the Franklin Templeton Funds.
Shareholder Authorization: I/We request the telephone redemption privilege under
the terms described below and in the prospectus for each investment company in
Franklin Templeton (a "Franklin Templeton Fund" or a "Fund"), now open or
opened at a later date, holding shares registered as follows:
- --------------------------------------------------------------------------------
Print name(s) as shown in registration (called "Shareholder")
- --------------------------------------------------------------------------------
Account number(s)
I/We authorize each Fund and Investor Services to honor and act upon telephone
requests, given as provided in this agreement, to redeem shares from any
Shareholder account.
- -------------------------------------
- -------------------------------------
Signature(s) of all registered owners and date
- -------------------------------------
- -------------------------------------
Printed name (and title/capacity, if applicable)
Verification Procedures: I/We understand and agree that: (1) each Fund and
Investor Services will employ reasonable procedures to confirm that redemption
instructions communicated by telephone are genuine and that if these
confirmation procedures are not followed, the Fund or Investor Services may be
liable for any losses due to unauthorized or fraudulent telephone instructions;
(2) the confirmation procedures will include the recording of telephone calls
requesting redemptions, requiring that the caller provide certain personal
and/or account information requested by the telephone service agent at the time
of the call for the purpose of establishing the caller's identification, and
the sending of confirmation statements to the address of record each time a
redemption is
- Templeton Region Funds
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initiated by telephone; and (3) as long as the Fund and Investor Services follow
the confirmation procedures in acting on instructions communicated by telephone
which were reasonably believed to be genuine at the time of receipt, neither
they nor their parent or affiliates will be liable for any loss, damages or
expenses caused by an unauthorized or fraudulent redemption request.
Jointly Owned/Co-Trustee Accounts: Each of us signing this agreement as either
joint owners or co-trustees authorize each Fund and Investor Services to honor
telephone redemption requests given by ANY ONE of the signers or our investment
representative of record, if any, ACTING ALONE.
Appointment of Attorney-in-Fact: In order to issue telephone redemption requests
acting alone, each of us individually makes the following appointment: I hereby
appoint the other joint owner(s)/co-trustee(s) as my agent(s)
(attorney(s)-in-fact) with full power and authority to individually act for me
in any lawful way with respect to the issuance of instructions to a Fund or
Investor Services in accordance with the telephone redemption privilege we have
requested by signing this agreement. This appointment shall not be affected by
my subsequent disability or incompetency and shall remain in effect until it is
revoked by either written notice from any one of us delivered to a Fund or
Investor Services by registered mail, return receipt requested, or by a Fund or
Investor Services upon receipt of any information that causes a Fund or
Investor Services to believe in good faith that there is or that there may be a
dispute among any of us with respect to the Franklin Templeton Fund account(s)
covered by this agreement. Each of us agrees to notify the Fund or Investor
Services immediately upon the death of any of the undersigned.
Corporate/Partnership/Trust/Retirement Accounts: The Shareholder and each of us
signing this agreement on behalf of the Shareholder represent and warrant to
each Franklin Templeton Fund and Investor Services that the Shareholder has the
authority to enter into this agreement and that each of us are duly authorized
to execute this agreement on behalf of the Shareholder. The Shareholder agrees
that its election of the telephone redemption privilege means that a Fund or
Investor Services may honor a telephone redemption request given by ANY officer/
partner/member/administrator or agent of Shareholder ACTING ALONE.
Restricted Accounts: Telephone redemptions and dividend option changes may not
be accepted on Franklin Templeton Trust Company retirement accounts.
PLEASE RETURN THIS FORM TO:
Franklin/Templeton Investor Services, Inc.
P.O. Box 33030
St. Petersburg, FL 33733-8030
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FRANKLIN TEMPLETON GROUP OF FUNDS
LITERATURE REQUEST E Call 1-800/DIAL BEN (1-800/342-5236) today for a free
descriptive brochure and prospectus on any of the funds listed below. The
prospectus contains more complete information, including fees, charges and
expenses, and should be read carefully before investing or sending money.
INTERNATIONAL GROWTH
Franklin Global Health Care Fund
Franklin International Equity Fund
Franklin Templeton Japan Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Global Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller
Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
INTERNATIONAL GROWTH
AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton
Global Currency Fund
Templeton Global Bond Fund
Templeton Growth and Income Fund
INTERNATIONAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
GROWTH AND INCOME
Franklin Balance Sheet
Investment Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Premier Return Fund
Franklin Real Estate Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Templeton American Trust, Inc.
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin AGE High Income Fund
Franklin Investment
Grade Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR NON-U.S. INVESTORS:
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged U.S.
Government Securities Fund
FOR CORPORATIONS:
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC FUNDS
SEEKING TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES
Franklin Valuemark(SM)
Franklin Templeton Valuemark
Income Plus (an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities.
PAGE
PART B
STATEMENT OF ADDITIONAL INFORMATION
PAGE
TEMPLETON GLOBAL INVESTMENT TRUST
STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 1, 1997
700 Central Avenue
St. Petersburg, FL 33701 1-800/DIAL BEN
Contents Page
How Do the Funds Invest Their Assets?..........................................
What Are the Funds' Potential Risks?...........................................
Investment Restrictions........................................................
Officers and Trustees..........................................................
Investment Management and Other Services.......................................
How Do the Funds Buy Securities
For Their Portfolios?..........................................................
How Do I Buy, Sell and Exchange Shares?........................................
How Are Fund Shares Valued?....................................................
Additional Information on
Distributions and Taxes........................................................
The Funds' Underwriter.........................................................
How Do the Funds Measure Performance?..........................................
Miscellaneous Information......................................................
Financial Statements...........................................................
Useful Terms and Definitions...................................................
Appendix.......................................................................
When reading this SAI, you will see certain terms beginning with capital
letters. This means the term is explained under "Useful Terms and Definitions."
The Templeton Global Investment Trust (the "Trust") is an open-end management
investment company with five separate series. There are four diversified series:
Templeton Growth and Income Fund ("Growth and Income Fund"); Templeton Global
Infrastructure Fund ("Infrastructure Fund"); Templeton Greater European Fund
("Greater European Fund"); and Templeton Latin America Fund ("Latin America
Fund"). There is also one non-diversified series, Templeton Americas Government
Securities Fund ("Americas Government Securities Fund"). This SAI relates to the
Advisor Class shares of the Greater European Fund and the Latin America Fund.
The Greater European Fund and the Latin America Fund may, separately or
collectively, be referred to as the "Fund" or "Funds,"or individually by its
name.
Greater European Fund's investment objective is long-term capital growth, which
it seeks to achieve by investing in equity securities of companies in Greater
Europe (Western, Central and Eastern Europe and Russia).
Latin America Fund's investment objective is long-term capital growth, which it
seeks to achieve by investing in equity securities and debt obligations of
issuers in Latin American countries.
PAGE
Advisor Class shares are only available for purchase by certain persons,
including, among others, certain financial institutions (such as banks, trust
companies, savings institutions and credit unions); government and tax-exempt
entities; certain pension, profit sharing and employee benefit plans; certain
qualified groups, including family trusts, endowments, foundations and
corporations; Franklin Templeton Fund Allocator Series; and directors, trustees,
officers and full time employees (and their family members) of Franklin
Templeton Group and the Franklin Templeton Group of Funds.
The Funds' Prospectus, dated January 1, 1997, as may be amended from time to
time, contains the basic information you should know before investing in a Fund.
For a free copy, call 1-800/DIAL BEN or write a Fund at the address shown.
THIS SAI IS NOT A PROSPECTUS. IT CONTAINS INFORMATION IN ADDITION TO AND IN MORE
DETAIL THAN SET FORTH IN THE PROSPECTUS. THIS SAI IS INTENDED TO PROVIDE YOU
WITH ADDITIONAL INFORMATION REGARDING THE ACTIVITIES AND OPERATIONS OF THE
FUNDS, AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
- ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF
THE U.S. GOVERNMENT;
- are not deposits or obligations of, or guaranteed or endorsed
by, any bank;
- are subject to investment risks, including the possible loss
of principal.
HOW DO THE FUNDS INVEST THEIR ASSETS?
Investment Policies. The investment objective and policies of each Fund are
described in the Fund's Prospectus under the heading "How Do the Funds Invest
Their Assets?"
Repurchase Agreements. Repurchase agreements are contracts under which the buyer
of a security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under a repurchase agreement, the seller is required
to maintain the value of the securities subject to the repurchase agreement at
not less than their repurchase price. The Investment Manager of each Fund will
monitor the value of such securities daily to determine that the value equals or
exceeds the repurchase price. Repurchase agreements may involve risks in the
event of default or insolvency of the seller, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities. A
Fund will enter into repurchase agreements only with parties who meet
creditworthiness standards approved by the Board, i.e., banks or broker-dealers
which have been determined by a Fund's Investment Manager to present no serious
risk of becoming involved in bankruptcy proceedings within the time frame
contemplated by the repurchase transaction.
Debt Securities. The Funds may invest in debt securities that are rated in any
rating category by S&P or Moody's or that are unrated by any rating agency. As
an operating policy, which may be changed by the Board without shareholder
approval, neither Greater European Fund nor Latin America Fund will invest more
than 5% of its assets in debt securities rated lower than Baa by Moody's or BBB
by S&P. The market value of debt
-2-
PAGE
securities generally varies in response to changes in interest rates and the
financial condition of each issuer. During periods of declining interest rates,
the value of debt securities generally increases. Conversely, during periods of
rising interest rates, the value of such securities generally declines. These
changes in market value will be reflected in a Fund's Net Asset Value.
Bonds which are rated Baa by Moody's are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated C by
Moody's are the lowest rated class of bonds, and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
Bonds rated BBB by S&P are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories. Bonds rated D by S&P are
the lowest rated class of bonds, and generally are in payment default. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Although they may offer higher yields than do higher rated securities,
high-risk, low rated debt securities (commonly referred to as "junk bonds") and
unrated debt securities generally involve greater volatility of price and risk
of principal and income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in which low rated
and unrated debt securities are traded are more limited than those in which
higher rated securities are traded. The existence of limited markets for
particular securities may diminish a Fund's ability to sell the securities at
fair value either to meet redemption requests or to respond to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain low rated or unrated debt
securities may also make it more difficult for a Fund to obtain accurate market
quotations for the purposes of valuing the Fund's portfolio. Market quotations
are generally available on many low rated or unrated securities only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of low rated debt securities,
especially in a thinly traded market. Analysis of the creditworthiness of
issuers of low rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of a Fund to achieve its investment
objective may, to the extent of investment in low rated debt securities, be more
dependent upon such creditworthiness analysis than would be the case if the Fund
were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated debt securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated debt securities prices because the advent of a
recession could lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the issuer of low
rated debt securities defaults, a Fund may incur additional expenses seeking
recovery.
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A Fund may accrue and report interest income on high yield bonds, such as zero
coupon bonds or pay-in-kind securities, even though it receives no cash interest
until the security's maturity or payment date. In order to qualify for
beneficial tax treatment afforded regulated investment companies, and to
generally be relieved of federal tax liabilities, a Fund must distribute all of
its net income and gains to shareholders (see "Additional Information on
Distributions and Taxes") generally on an annual basis. A Fund may have to
dispose of portfolio securities under disadvantageous circumstances to generate
cash or leverage itself by borrowing cash in order to satisfy the distribution
requirement.
Recent legislation, which requires federally insured savings and loan
associations to divest their investments in low rated debt securities, may have
a material adverse effect on a Fund's Net Asset Value and investment practices.
Structured Investments. Included among the issuers of debt securities in which
each Fund may invest are entities organized and operated solely for the purpose
of restructuring the investment characteristics of various securities. These
entities are typically organized by investment banking firms which receive fees
in connection with establishing each entity and arranging for the placement of
its securities. This type of restructuring involves the deposit with or purchase
by an entity, such as a corporation or trust, of specified instruments and the
issuance by that entity of one or more classes of securities ("structured
investments") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured investments to create securities with
different investment characteristics such as varying maturities, payment
priorities or interest rate provisions. The extent of the payments made with
respect to structured investments is dependent on the extent of the cash flow on
the underlying instruments. Because structured investments of the type in which
each Fund anticipates investing typically involve no credit enhancement, their
credit risk will generally be equivalent to that of the underlying instruments.
Each Fund is permitted to invest in a class of structured investments that is
either subordinated or unsubordinated to the right of payment of another class.
Subordinated structured investments typically have higher yields and present
greater risks than unsubordinated structured investments. Although each Fund's
purchase of subordinated structured investments would have a similar economic
effect to that of borrowing against the underlying securities, the purchase will
not be deemed to be leverage for purposes of the limitations placed on the
extent that such Fund's assets may be used for borrowing activities.
Certain issuers of structured investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, a Fund's investment in these
structured investments may be limited by the restrictions contained in the 1940
Act. Structured investments are typically sold in private placement
transactions, and there currently is no active trading market for structured
investments. To the extent such investments are illiquid, they will be subject
to a Fund's restrictions on investments in illiquid securities.
Convertible Securities. The Funds may invest in convertible securities,
including convertible debt and convertible preferred stock. Convertible
securities are fixed-income securities which may be converted at a stated price
within a specific amount of time into a specified number of shares of common
stock. These securities are usually senior to common stock in a corporation's
capital structure, but usually are subordinated to non-convertible debt
securities. In general, the value of a convertible security is the higher of its
investment value (its value as a fixed-income security) and its conversion value
(the value of the underlying shares of
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common stock if the security is converted). The investment value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. The conversion value of a
convertible security is influenced by the value of the underlying common stock.
Futures Contracts. Each Fund may purchase and sell financial futures contracts.
Although some financial futures contracts call for making or taking delivery of
the underlying securities, in most cases these obligations are closed out before
the settlement date. The closing of a contractual obligation is accomplished by
purchasing or selling an identical offsetting futures contract. Other financial
futures contracts by their terms call for cash settlements. Each Fund may also
buy and sell index futures contracts with respect to any stock or bond index
traded on a recognized stock exchange or board of trade. An index futures
contract is a contract to buy or sell units of an index at a specified future
date at a price agreed upon when the contract is made. The index futures
contract specifies that no delivery of the actual securities making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the index at the expiration of the contract.
At the time a Fund purchases a futures contract, an amount of cash, U.S.
government securities, or other highly liquid debt securities equal to the
market value of the contract will be deposited in a segregated account with the
Fund's custodian. When writing a futures contract, a Fund will maintain with its
custodian liquid assets that, when added to the amounts deposited with a futures
commission merchant or broker as margin, are equal to the market value of the
instruments underlying the contract. Alternatively, a Fund may "cover" its
position by owning the instruments underlying the contract or, in the case of an
index futures contract, owning a portfolio with a volatility substantially
similar to that of the index on which the futures contract is based, or holding
a call option permitting the Fund to purchase the same futures contract at a
price no higher than the price of the contract written by the Fund (or at a
higher price if the difference is maintained in liquid assets with the Fund's
custodian).
Options on Securities, Indices and Futures. Each Fund may write covered put and
call options and purchase put and call options on securities, securities indices
and futures contracts that are traded on U.S. and foreign exchanges and in the
over-the-counter markets.
An option on a security or a futures contract is a contract that gives the
purchaser of the option, in return for the premium paid, the right to buy a
specified security or futures contract (in the case of a call option) or to sell
a specified security or futures contract (in the case of a put option) from or
to the writer of the option at a designated price during the term of the option.
An option on a securities index gives the purchaser of the option, in return for
the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option.
Each Fund may write a call or put option only if the option is "covered." A call
option on a security or futures contract written by a Fund is "covered" if the
Fund owns the underlying security or futures contract covered by the call or has
an absolute and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated account
by its custodian) upon conversion or exchange of other securities held in its
portfolio. A call option on a security or futures contract is also covered if a
Fund holds a call on the same security or futures contract and in the same
principal amount as the call written where the exercise price of the call held
(a) is equal to or less than the exercise price of the call written or (b) is
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash or high grade U.S. Government securities in a
segregated account with its custodian. A put option on a security or
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futures contract written by a Fund is "covered" if the Fund maintains cash or
fixed-income securities with a value equal to the exercise price in a segregated
account with its custodian, or else holds a put on the same security or futures
contract and in the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written.
A Fund will cover call options on securities indices that it writes by owning
securities whose price changes, in the opinion of the Fund's Investment Manager,
are expected to be similar to those of the index, or in such other manner as may
be in accordance with the rules of the exchange on which the option is traded
and applicable laws and regulations. Nevertheless, where a Fund covers a call
option on a securities index through ownership of securities, such securities
may not match the composition of the index. In that event, a Fund will not be
fully covered and could be subject to risk of loss in the event of adverse
changes in the value of the index. A Fund will cover put options on securities
indices that it writes by segregating assets equal to the option's exercise
price, or in such other manner as may be in accordance with the rules of the
exchange on which the option is traded and applicable laws and regulations.
A Fund will receive a premium from writing a put or call option, which increases
its gross income in the event the option expires unexercised or is closed out at
a profit. If the value of a security, index or futures contract on which a Fund
has written a call option falls or remains the same, the Fund will realize a
profit in the form of the premium received (less transaction costs) that could
offset all or a portion of any decline in the value of the portfolio securities
being hedged. If the value of the underlying security, index or futures contract
rises, however, a Fund will realize a loss in its call option position, which
will reduce the benefit of any unrealized appreciation in its investments. By
writing a put option, a Fund assumes the risk of a decline in the underlying
security, index or futures contract. To the extent that the price changes of the
portfolio securities being hedged correlate with changes in the value of the
underlying security, index or futures contract, writing covered put options will
increase a Fund's losses in the event of a market decline, although such losses
will be offset in part by the premium received for writing the option.
Each Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, a Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of a Fund's investments does not
decline as anticipated, or if the value of the option does not increase, each
Funds' loss will be limited to the premium paid for the option plus related
transaction costs. The success of this strategy will depend, in part, on the
accuracy of the correlation between the changes in value of the underlying
security, index or futures contract and the changes in value of a Fund's
security holdings being hedged.
A Fund may purchase call options on individual securities or futures contracts
to hedge against an increase in the price of securities or futures contracts
that it anticipates purchasing in the future. Similarly, a Fund may purchase
call options on a securities index to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market segment, at a time
when the Fund holds uninvested cash or short-term debt securities awaiting
investment. When purchasing call options, a Fund will bear the risk of losing
all or a portion of the premium paid if the value of the underlying security,
index or futures contract does not rise.
There can be no assurance that a liquid market will exist when a Fund seeks to
close out an option position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers,
or the options exchange could suspend trading after the price has risen or
fallen more than the maximum specified by the exchange. Although a Fund may be
able to offset to some extent any
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adverse effects of being unable to liquidate an option position, it may
experience losses in some cases as a result of such inability. The value of
over-the-counter options purchased by a Fund, as well as the cover for options
written by a Fund, are considered not readily marketable and are subject to the
Trust's limitation on investments in securities that are not readily marketable.
See "Investment Restrictions."
Foreign Currency Hedging Transactions. In order to hedge against foreign
currency exchange rate risks, each Fund may enter into forward foreign currency
exchange contracts and foreign currency futures contracts, as well as purchase
put or call options on foreign currencies, as described below. Each Fund may
also conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market.
A Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and privately traded by
currency traders and their customers. A Fund may enter into a forward contract,
for example, when it enters into a contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock in" the U.S. dollar
price of the security. In addition, for example, when a Fund believes that a
foreign currency may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell an amount of the former
foreign currency approximating the value of some or all of its portfolio
securities denominated in such foreign currency. This second investment practice
is generally referred to as "cross-hedging." Because in connection with a Fund's
forward foreign currency transactions, an amount of its assets equal to the
amount of the purchase will be held aside or segregated to be used to pay for
the commitment, a Fund will always have cash, cash equivalents or high quality
debt securities available in an amount sufficient to cover any commitments under
these contracts or to limit any potential risk. The segregated account will be
marked-to-market on a daily basis. While these contracts are not presently
regulated by the Commodity Futures Trading Commission ("CFTC"), the CFTC may in
the future assert authority to regulate forward contracts. In such event, the
Funds' ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change in
the relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for a Fund
than if it had not engaged in such contracts.
A Fund may purchase and write put and call options on foreign currencies for the
purpose of protecting against declines in the dollar value of foreign portfolio
securities and against increases in the dollar cost of foreign securities to be
acquired. As is the case with other kinds of options, however, the writing of an
option on foreign currency will constitute only a partial hedge up to the amount
of the premium received, and a Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute an effective hedge
against fluctuation in exchange rates, although, in the event of rate movements
adverse to its position, a Fund may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to be written or
purchased by a Fund will be traded on U.S. and foreign exchanges or
over-the-counter.
A Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of foreign currencies ("foreign currency futures"). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of a
Fund's portfolio securities or adversely affect the prices of securities that a
Fund intends to purchase at a later date.
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The successful use of foreign currency futures will usually depend on the
ability of the Investment Managers to forecast currency exchange rate movements
correctly. Should exchange rates move in an unexpected manner, a Fund may not
achieve the anticipated benefits of foreign currency futures or may realize
losses.
WHAT ARE THE FUNDS' POTENTIAL RISKS?
Both Funds have the right to purchase securities in any foreign country,
developed or developing. You should consider carefully the substantial risks
involved in securities of companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the U.S.
Foreign companies are not generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to U.S. companies. The Funds, therefore, may
encounter difficulty in obtaining market quotations for purposes of valuing its
portfolio and calculating its Net Asset Value. Foreign markets have
substantially less volume than the NYSE and securities of some foreign companies
are less liquid and more volatile than securities of comparable U.S. companies.
Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the U.S., are likely to be higher. In many foreign
countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the U.S.
Investments in companies domiciled in developing countries may be subject to
potentially higher risks than investments in developed countries. These risks
include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict a
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries.
To the extent of the Communist Party's influence, investments in such countries
may involve risks of nationalization, expropriation and confiscatory taxation.
The communist governments of a number of Eastern European countries expropriated
large amounts of private property in the past, in many cases without adequate
compensation, and there can be no assurance that such expropriation will not
occur in the future. In the event of such expropriation, a Fund could lose a
substantial portion of any investments it has made in the affected countries.
Further, no accounting standards exist in Eastern European countries. Finally,
even though certain Eastern European currencies may be convertible into U.S.
dollars, the conversion rates may be artificial to the actual market values and
may be adverse to Fund shareholders.
Certain Eastern European countries, which do not have market economies, are
characterized by an absence of developed legal structures governing private and
foreign investments and private property. Certain countries require governmental
approval prior to investments by foreign persons, or limit the amount of
investment by foreign persons in a particular company, or limit the investment
of foreign persons to only a specific class of
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securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals.
Governments in certain Eastern European countries may require that a
governmental or quasi-governmental authority act as custodian of a Fund's assets
invested in such country. To the extent such governmental or quasi-governmental
authorities do not satisfy the requirements of the 1940 Act to act as foreign
custodians of a Fund's cash and securities, the Fund's investment in such
countries may be limited or may be required to be effected through
intermediaries. The risk of loss through governmental confiscation may be
increased in such countries.
Greater European Fund may invest a portion of its assets in Russian securities.
There can be no assurance that appropriate sub-custody arrangements will be
available to the Fund if and when the Fund seeks to invest a portion of its
assets in Russian securities. As a non-fundamental policy, the Fund will not
invest more than 5% of its total assets in Russian securities.
Investing in Russian securities involves a high degree of risk and special
considerations not typically associated with investing in the U.S. securities
markets, and should be considered highly speculative. Such risks include: (i)
delays in settling portfolio transactions and risk of loss arising out of
Russia's system of share registration and custody; (ii) the risk that it may be
impossible or more difficult than in other countries to obtain and/or enforce a
judgment; (iii) pervasiveness of corruption and crime in the Russian economic
system; (iv) currency exchange rate volatility and the lack of available
currency hedging instruments; (v) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation); (vi) controls on
foreign investment and local practices disfavoring foreign investors and
limitations on repatriation of invested capital, profits and dividends, and on
the Fund's ability to exchange local currencies for U.S. dollars; (vii) the risk
that the government of Russia or other executive or legislative bodies may
decide not to continue to support the economic reform programs implemented since
the dissolution of the Soviet Union and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed prior to the dissolution of the Soviet Union; (viii) the
financial condition of Russian companies, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (ix)
dependency on exports and the corresponding importance of international trade;
(x) the risk that the Russian tax system will not be reformed to prevent
inconsistent, retroactive and/or exorbitant taxation; and (xi) possible
difficulty in identifying a purchaser of securities held by the Fund due to the
underdeveloped nature of the securities markets.
There is little historical data on Russian securities markets because they are
relatively new and a substantial proportion of securities transactions in Russia
are privately negotiated outside of stock exchanges. Because of the recent
formation of the securities markets as well as the underdeveloped state of the
banking and telecommunications systems, settlement, clearing and registration of
securities transactions are subject to significant risks. Ownership of shares
(except where shares are held through depositories that meet the requirements of
the 1940 Act) is defined according to entries in the company's share register
and normally evidenced by extracts from the register or by formal share
certificates. However, there is no central registration system for shareholders
and these services are carried out by the companies themselves or by registrars
located throughout Russia. These registrars are not necessarily subject to
effective state supervision and it is possible for the Fund to lose its
registration through fraud, negligence or even mere oversight. While the Fund
will endeavor to ensure that its interest continues to be appropriately recorded
either itself or through a custodian or
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other agent inspecting the share register and by obtaining extracts of share
registers through regular confirmations, these extracts have no legal
enforceability and it is possible that subsequent illegal amendment or other
fraudulent act may deprive the Fund of its ownership rights or improperly dilute
its interests. In addition, while applicable Russian regulations impose
liability on registrars for losses resulting from their errors, it may be
difficult for the Fund to enforce any rights it may have against the registrar
or issuer of the securities in the event of loss of share registration.
Furthermore, although a Russian public enterprise with more than 1,000
shareholders is required by law to contract out the maintenance of its
shareholder register to an independent entity that meets certain criteria, in
practice this regulation has not always been strictly enforced. Because of this
lack of independence, management of a company may be able to exert considerable
influence over who can purchase and sell the company's shares by illegally
instructing the registrar to refuse to record transactions in the share
register. This practice may prevent the Fund from investing in the securities of
certain Russian issues deemed suitable by its Investment Manager. Further, this
also could cause a delay in the sale of Russian securities by the Fund if a
potential purchaser is deemed unsuitable, which may expose the Fund to potential
loss on the investment.
Investing in Latin American issuers involves a high degree of risk and special
considerations not typically associated with investing in the U. S. and other
more developed securities markets, and should be considered highly speculative.
Such risks include: (i) restrictions or controls on foreign investment and
limitations on repatriation of invested capital and Latin America Fund's ability
to exchange local currencies for U.S. dollars; (ii) higher and sometimes
volatile rates of inflation (including the risk of social unrest associated with
periods of hyper-inflation); (iii) the risk that certain Latin American
countries, which are among the largest debtors to commercial banks and foreign
governments and which have experienced difficulty in servicing sovereign debt
obligations in the past, may negotiate to restructure sovereign debt
obligations; (iv) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a judgment; (v) currency exchange rate
fluctuations and the lack of available currency hedging instruments; (vi) more
substantial government involvement in and control over the local economies; and
(vii) dependency on exports and the corresponding importance of international
trade.
Latin American countries may be subject to a greater degree of economic,
political, and social instability than is the case in the U.S., Japan, or
Western European countries. Such instability may result from, among other
things, the following: (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in governmental
control through extra-constitutional means; (ii) popular unrest associated with
demands for improved political, economic, and social conditions; (iii) internal
insurgencies and terrorist activities; (iv) hostile relations with neighboring
countries; (v) ethnic, religious and racial disaffection; and (vi) drug
trafficking.
Each Fund endeavors to buy and sell foreign currencies on as favorable a basis
as practicable. Some price spread on currency exchange (to cover service
charges) may be incurred, particularly when a Fund changes investments from one
country to another or when proceeds of the sale of shares in U.S. dollars are
used for the purchase of securities in foreign countries. Also, some countries
may adopt policies which would prevent a Fund from transferring cash out of the
country or withhold portions of interest and dividends at the source. There is
the possibility of cessation of trading on national exchanges, expropriation,
nationalization or confiscatory taxation, withholding and other foreign taxes on
income or other amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country), default in foreign
government securities, political or social instability, or diplomatic
developments which could affect investments in securities of issuers in foreign
nations.
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The Funds may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Some countries in which the Funds may invest may also have fixed
or managed currencies that are not free-floating against the U.S. dollar.
Further, certain currencies may not be internationally traded. Certain of these
currencies have experienced a steady devaluation relative to the U.S. dollar.
Any devaluations in the currencies in which the Funds' portfolio securities are
denominated may have a detrimental impact on the Funds. Through the flexible
policy of the Funds, the Investment Managers endeavor to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where from time to time they place the Funds' investments.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
The Board considers at least annually the likelihood of the imposition by any
foreign government of exchange control restrictions which would affect the
liquidity of the Funds' assets maintained with custodians in foreign countries,
as well as the degree of risk from political acts of foreign governments to
which such assets may be exposed. The Board also considers the degree of risk
involved through the holding of portfolio securities in domestic and foreign
securities depositories (see "Investment Advisory and Other Services"). However,
in the absence of willful misfeasance, bad faith or gross negligence on the part
of an Investment Manager, any losses resulting from the holding of portfolio
securities in foreign countries and/or with securities depositories will be at
the risk of the shareholders. No assurance can be given that the Board's
appraisal of the risks will always be correct or that such exchange control
restrictions or political acts of foreign governments will not occur.
A Fund's ability to reduce or eliminate its futures and related options
positions will depend upon the liquidity of the secondary markets for such
futures and options. The Funds intend to purchase or sell futures and related
options only on exchanges or boards of trade where there appears to be an active
secondary market, but there is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. Use of futures and
options for hedging may involve risks because of imperfect correlations between
movements in the prices of the futures or options and movements in the prices of
the securities being hedged. Successful use of futures and related options by a
Fund for hedging purposes also depends upon the Investment Manager's ability to
predict correctly movements in the direction of the market, as to which no
assurance can be given.
There are several risks associated with transactions in options on securities
indices. For example, there are significant differences between the securities
and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision
as to whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events. There can be no
assurance that a liquid market will exist when a Fund seeks to close out an
option position. If a Fund were unable to close out an option that it had
purchased on a securities index, it would have to exercise the option in order
to realize any profit or the option may expire worthless. If trading were
suspended in an option purchased by a Fund, it would not be able to close out
the option. If restrictions on exercise were imposed, a Fund might be unable to
exercise an option it has purchased. Except to the extent that a call option on
an index written by a Fund is covered by an option on the same index purchased
by the Fund, movements in the index may result in
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a loss to the Fund; however, such losses may be mitigated by changes in the
value of the Fund's securities during the period the option was outstanding.
Additional risks may be involved with the Funds' special investment techniques,
including loans of portfolio securities and borrowing for investment purposes.
These risks are described under the heading "How Do the Funds Invest Their
Assets? - Types of Securities In Which Funds May Invest" in the Prospectus.
INVESTMENT RESTRICTIONS
The Funds have adopted the following restrictions as fundamental policies. These
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of a Fund. Under the 1940 Act, this means the
approval of (i) more than 50% of the outstanding shares of a Fund or (ii) 67% or
more of the shares of a Fund present at a shareholder meeting if more than 50%
of the outstanding shares of the Fund are represented at the meeting in person
or by proxy, whichever is less. Each Fund may not:
1. Invest in real estate or mortgages on real estate (although the Funds may
invest in marketable securities secured by real estate or interests therein);
invest in other open-end investment companies (except in connection with a
merger, consolidation, acquisition or reorganization); invest in interests
(other than publicly issued debentures or equity stock interests) in oil, gas or
other mineral exploration or development programs; or purchase or sell commodity
contracts (except futures contracts as described in the Prospectus).
2. Purchase any security (other than obligations of the U.S. government, its
agencies or instrumentalities) if, as a result, as to 75% of a Fund's total
assets (a) more than 5% of the Fund's total assets would then be invested in
securities of any single issuer, or (b) the Fund would then own more than 10% of
the voting securities of any single issuer.
3. Act as an underwriter; issue senior securities except as set forth in
investment restriction 6 below; or purchase on margin or sell short, except that
each Fund may make margin payments in connection with futures, options and
currency transactions.
4. Loan money, except that a Fund may (a) purchase a portion of an issue of
publicly distributed bonds, debentures, notes and other evidences of
indebtedness, (b) enter into repurchase agreements and (c) lend its portfolio
securities.
5. Borrow money, except that a Fund may borrow money from banks in an amount not
exceeding 33 1/3% of the value of its total assets (including the amount
borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be necessary in
connection with permitted borrowings); provided, however, this does not prohibit
escrow, collateral or margin arrangements in connection with its use of options,
futures contracts and options on future contracts.
7. Invest more than 25% of its total assets in a single industry.
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8. Participate on a joint or a joint and several basis in any trading account in
securities. (See "How Do the Funds Buy Securities For Their Portfolios?") as to
transactions in the same securities for the Funds and/or other mutual funds and
clients with the same or affiliated advisers.)
If a Fund receives from an issuer of securities held by the Fund subscription
rights to purchase securities of that issuer, and if the Fund exercises such
subscription rights at a time when the Fund's portfolio holdings of securities
of that issuer would otherwise exceed the limits set forth in Investment
Restrictions 2 or 7 above, it will not constitute a violation if, prior to
receipt of securities upon exercise of such rights, and after announcement of
such rights, the Fund has sold at least as many securities of the same class and
value as it would receive on exercise of such rights.
Additional Restrictions. Each Fund has adopted the following additional
restrictions which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, a Fund may not:
1. Purchase or retain securities of any company in which trustees or officers of
the Trust or of a Fund's Investment Manager, individually owning more than 1/2
of 1% of the securities of such company, in the aggregate own more than 5% of
the securities of such company.
2. Invest more than 5% of the value of its total assets in securities of issuers
which have been in continuous operation less than three years.
3. Invest more than 5% of its net assets in warrants whether or not listed on
the NYSE or American Stock Exchange, and more than 2% of its net assets in
warrants that are not listed on those exchanges. Warrants acquired in units or
attached to securities are not included in this restriction.
4. Purchase or sell real estate limited partnership interests.
5. Purchase or sell interests in oil, gas and mineral leases (other than
securities of companies that invest in or sponsor such programs).
6. Invest for the purpose of exercising control over management of any company.
7. Purchase more than 10% of a company's outstanding voting securities.
8. Invest more than 15% of the Fund's total assets in securities that are not
readily marketable (including repurchase agreements maturing in more than seven
days and over-the-counter options purchased by the Fund), including no more than
10% of its total assets in restricted securities. Rule 144A securities are not
subject to the 10% limitation on restricted securities, although a Fund will
limit its investment in all restricted securities, including Rule 144A
securities, to 15% of its total assets.
If a percentage restriction is met at the time of investment, a later increase
or decrease in the percentage due to a change in value of portfolio securities
or the amount of assets will not be considered a violation of any of the
foregoing restrictions.
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OFFICERS AND TRUSTEES
The Board has the responsibility for the overall management of the Trust,
including general supervision and review of its investment activities. The
Board, in turn, elects the officers of the Trust who are responsible for
administering the Trust's day-to-day operations. The affiliations of the
officers and Board members and their principal occupations for the past five
years are shown below. Members of the Board who are considered "interested
persons" of the Trust under the 1940 Act are indicated by an asterisk (*).
<TABLE>
<CAPTION>
<S> <C> <C>
HARRIS J. ASHTON Trustee Chairman of the board, president, and chief
Metro Center executive officer of General Host Corporation
1 Station Place (nursery and craft centers); and a director of
Stamford, Connecticut RBC Holdings (U.S.A.) Inc. (a bank holding
Age 64 company) and Bar-S Foods.
NICHOLAS F. BRADY* Trustee Chairman of Templeton Emerging Markets
102 East Dover Street Investment Trust PLC; chairman of Templeton
Easton, Maryland Latin America Investment Trust PLC; chairman
Age 66 of Darby Overseas Investments, Ltd. (an
investment firm) (1994-present); chairman and
director of Templeton Central and Eastern
European Fund; director of the Amerada Hess
Corporation, Christiana Companies, and the
H.J. Heinz Company; formerly, Secretary of the
United States Department of the Treasury
(1988-January 1993) and chairman of the board
of Dillon, Read & Co. Inc. (investment banking)
prior to 1988; and director or trustee of 23 of the
investment companies in the Franklin Templeton
Group of Funds.
MARTIN L. FLANAGAN* Trustee and Vice Senior vice president, treasurer, and chief
777 Mariners Island Blvd. President financial officer of Franklin Resources, Inc.;
San Mateo, California director, and executive vice president of
Age 36 Templeton Investment Counsel, Inc.; director,
president and chief executive officer of
Templeton Global Investors, Inc.; accountant
with Arthur Andersen & Company (1982-1983);
and a member of the International Society of
Financial Analysts and the American Institute of
Certified Public Accountants; and officer and/or
director or trustee of 60 of the investment
companies in the Franklin Templeton Group of
Funds.
</TABLE>
-14-
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<TABLE>
<CAPTION>
<S> <C> <C>
HASSO-G VON Trustee Farmer; and president of Clairhaven
DIERGARDT- Investments, Ltd. and other private investment
NAGLO companies; and director or trustee of 12 of the
R.R. 3 investment companies in the Franklin Templeton
Stouffville, Ontario Group of Funds.
Age 80
S. JOSEPH FORTUNATO Trustee Member of the law firm of Pitney, Hardin, Kipp
200 Campus Drive & Szuch; a director of General Host Corporation
Florham Park, New Jersey (nursery and craft centers); and director or
Age 64 trustee of 57 of the investment companies in the
Franklin Templeton Group of Funds.
JOHN Wm. GALBRAITH Trustee President of Galbraith Properties, Inc. (personal
360 Central Avenue investment company); director of Gulf West
Suite 1300 Banks, Inc. (bank holding company)
St. Petersburg, Florida (1995-present); formerly, director of Mercantile
Age 74 Bank (1991-1995), vice chairman of Templeton,
Galbraith & Hansberger Ltd. (1986-1992), and
chairman of Templeton Funds Management, Inc.
(1974-1991); and director or trustee of 23 of the
investment companies in the Franklin Templeton
Group of Funds.
ANDREW H. HINES, JR. Trustee Consultant for the Triangle Consulting Group;
150 2nd Avenue N. chairman and director of Precise Power
St. Petersburg, Florida Corporation; executive-in-residence of Eckerd
Age 73 College (1991-present); director of Checkers
Drive-In Restaurants, Inc.; formerly, chairman
of the board and chief executive officer of
Florida Progress Corporation (1982-February
1990) and director of various of its subsidiaries;
and director or trustee of 24 of the investment
companies in the Franklin Templeton Group of
Funds.
</TABLE>
-15-
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<TABLE>
<CAPTION>
<S> <C> <C>
CHARLES B. JOHNSON* Trustee, Chairman Trustee, Chairman, President, chief executive
777 Mariners Island Blvd. of the Board and officer, and director of Franklin Resources, Inc.;
San Mateo, California Vice President chairman of the board and director of Franklin
Age 63 Advisers, Inc. and Franklin Templeton
Distributors, Inc.; director of Franklin
Templeton Investor Services, Inc., General Host
Corporation and Templeton Global Investors,
Inc.; and officer and director, trustee or
managing general partner, as the case may be, of
most other subsidiaries of Franklin Resources,
Inc., and 56 of the investment companies in the
Franklin Templeton Group of Funds.
BETTY P. KRAHMER Trustee Director or trustee of various civic associations;
2201 Kentmere Parkway formerly, economic analyst, U.S. Government;
Wilmington, Delaware and director or trustee of 23 of the investment
Age 67 companies in the Franklin Templeton Group of
Funds.
GORDON S. MACKLIN Trustee Chairman of White River Corporation
8212 Burning Tree Road (information services); director of Fund America
Bethesda, Maryland Enterprises Holdings, Inc., MCI
Age 68 Communications Corporation, Fusion Systems
Corporation, Infovest Corporation, MedImmune,
Inc. Source One Mortgage Services Corporation,
and Shoppers Express, Inc. (on-line shopping
service); formerly, chairman of Hambrecht and
Quist Group, director of H&Q Healthcare
Investors and Lockheed Martin Corporation, and
president of the National Association of
Securities Dealers, Inc.; and director or trustee
of 52 of the investment companies in the
Franklin Templeton Group of Funds.
FRED R. MILLSAPS Trustee Manager of personal investments (1978-present);
2665 N.E. 37th Drive director of various other business and nonprofit
Fort Lauderdale, Florida organizations; formerly, chairman and chief
Age 67 executive officer of Landmark Banking
Corporation (1969-1978), financial vice president
of Florida Power and Light (1965-1969), and
vice president of The Federal Reserve Bank of
Atlanta (1958-1965); and director or trustee of
24 of the investment companies in the Franklin
Templeton Group of Funds.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
EDITH E. HOLIDAY Trustee Director (1993 - present) of Amerada Hess
3239 38th Street, N.W. Corporation and Hercules Incorporated; director
Washington, D.C. 20016 of Beverly Enterprises, Inc. (1995 - present) and
Age 44 H. J. Heinz Company (1994 - present); chairman
(1995 - present) and trustee (1993 present) of
National Child Research Center; formerly,
assistant to the President of the United States and
Secretary of the Cabinet (1990-1993), general
counsel to the United States Treasury
Department (1989-1990), and counselor to the
Secretary and Assistant Secretary for Public
Affairs and Public Liaison - United States
Treasury Department (1988-1989); and director
or trustee of 15 of the investment companies in
the Franklin Templeton Group of Funds.
MARK G. HOLOWESKO President President and chief investment officer of
Lyford Cay Templeton Global Advisors Limited; executive
Nassau, Bahamas vice president and director of Templeton
Age 36 Worldwide, Inc.; president or vice president of
the Templeton Funds; formerly, investment
administrator with Roy West Trust Corporation
(Bahamas) Limited (1984-1985); and officer of
23 of the investment companies in the Franklin
Templeton Group of Funds.
RUPERT H. JOHNSON, JR. Vice President Executive vice president and director of Franklin
777 Mariners Island Blvd. Resources, Inc. and Franklin Templeton
San Mateo, California Distributors, Inc.; president and director of
Age 55 Franklin Advisers, Inc.; director of Franklin
Templeton Investor Services, Inc.; and officer
and/or director, trustee or managing general
partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc., and an
officer and/or director, as the case may be, of
most other subsidiaries of Franklin Resources,
Inc. and 60 of the investment companies in the
Franklin Templeton Group of Funds.
</TABLE>
-17-
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<TABLE>
<CAPTION>
<S> <C> <C>
HARMON E. BURNS Vice President Executive vice president, secretary and director
777 Mariners Island Blvd. of Franklin Resources, Inc.; executive vice
San Mateo, California president and director of Franklin Templeton
Age 51 Distributors, Inc.; executive vice president of
Franklin Advisers, Inc.; officer and/or director,
as the case may be, of other subsidiaries of
Franklin Resources, Inc.; and officer and/or
director or trustee of 60 of the investment
companies in the Franklin Templeton Group of
Funds.
CHARLES E. JOHNSON Vice President Senior vice president and director of Franklin
500 East Broward Blvd. Resources, Inc.; senior vice president of
Ft. Lauderdale, Florida Franklin Templeton Distributors, Inc.; president
Age 40 and director of Franklin Institutional Service
Corporation; president and chief executive
officer of Templeton Worldwide, Inc.; chairman
of the board of Templeton Investment Counsel,
Inc.; officer and/or director, as the case may be,
of other subsidiaries of Franklin Resources, Inc.;
and an officer and/or director or trustee of 39 of
the investment companies in the Franklin
Templeton Group of Funds.
DEBORAH R. GATZEK Vice President Senior vice president and general counsel of
777 Mariners Island Blvd. Franklin Resources, Inc.; senior vice president
San Mateo, California of Franklin Templeton Distributors, Inc.; vice
Age 47 president of Franklin Advisers, Inc. and officer
of 60 of the investment companies in the
Franklin Templeton Group of Funds.
SAMUEL J. FORESTER, JR. Vice President President of the Templeton Global Bond
500 East Broward Blvd. Managers Division of Templeton Investment
Fort Lauderdale, Florida Counsel, Inc.; president or vice president of
Age 48 other Templeton Funds; founder and partner of
Forester, Hairston Investment Management
(1989-1990); managing director (Mid-East
Region) of Merrill Lynch, Pierce, Fenner &
Smith Inc. (1987-1988); and advisor for Saudi
Arabian Monetary Agency (1982-1987); and
officer of 10 of the investment companies in the
Franklin Templeton Group of Funds.
</TABLE>
-18-
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<TABLE>
<CAPTION>
<S> <C> <C>
JOHN R. KAY Vice President Vice president and treasurer of Templeton
500 East Broward Blvd. Global Investors, Inc. and Templeton
Fort Lauderdale, Florida Worldwide, Inc.; assistant vice president of
Age 56 Franklin Templeton Distributors, Inc.; formerly,
vice president and controller of the Keystone
Group, Inc.; and officer of 27 of the investment
companies in the Franklin Templeton Group of
Funds.
GARY CLEMONS Vice President Research analyst for Templeton Investment
500 East Broward Blvd. Counsel, Inc. (1993-present); formerly, research
Fort Lauderdale, Florida analyst for Templeton Quantitative Advisors,
Age 39 Inc.
DOUGLAS R. LEMPEREUR Vice President Senior vice president of the Templeton Global
500 East Broward Blvd. Bond Managers Division of Templeton
Fort Lauderdale, Florida Investment Counsel, Inc.; formerly, securities
Age 47 analyst for Colonial Management Associates
(1985-1988), Standish, Ayer & Wood
(1977-1985), and The First National Bank of
Chicago (1974-1977); and officer of 3 of the
investment companies in the Franklin Templeton
Group of Funds.
NEIL S. DEVLIN Vice President Senior vice president, Portfolio Management/
500 East Broward Blvd. Research, of the Templeton Global Bond
Fort Lauderdale, Florida Managers division of Templeton Investment
Age 39 Counsel, Inc.; formerly, portfolio manager and
bond analyst for Constitutional Capital
Management (1985-1987); and a bond trader and
research analyst for Bank of New England
(1982-1985); and officer of 4 of the investment
companies in the Franklin Templeton Group of
Funds.
JAMES R. BAIO Treasurer Certified public accountant; senior vice president
500 East Broward Blvd. of Templeton Worldwide, Inc., Templeton
Fort Lauderdale, Florida Global Investors, Inc., and Templeton Funds
Age 42 Trust Company; formerly, senior tax manager
for Ernst & Young (certified public accountants)
(1977-1989); and treasurer of 23 of the
investment companies in the Franklin Templeton
Group of Funds.
</TABLE>
The table above shows the officers and Board members who are affiliated with
Distributors and the Investment Managers. Nonaffiliated members of the Board and
Mr. Brady are currently paid an annual retainer and/or fees
-19-
PAGE
for attendance at Board and Committee meetings, the amount of which is based on
the level of assets in each Fund. Accordingly, the Trust currently pays the
independent Trustees and Mr. Brady an annual retainer of $1,000 and a fee of
$100 per meeting of the Board and its portion of a flat fee of $2,000 for each
Audit Committee meeting and/or Nominating and Compensation Committee meeting
attended. As shown above, some of the nonaffiliated Board members also serve as
directors, trustees or managing general partners of other investment companies
in the Franklin Templeton Group of Funds. They may receive fees from these funds
for their services. The following table provides the total fees paid to
nonaffiliated Board members and Mr. Brady by the Trust and by other funds in the
Franklin Templeton Group of Funds.
-20-
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<TABLE>
<CAPTION>
Total Fees Number of Boards in
Total Fees Received from the the Franklin Templeton
Received from Franklin Templeton Group of Funds on
Name the Trust* Group of Funds** Which Each Serves***
<S> <C> <C> <C>
Harris J. Ashton................................. $425 $ 327,925 55
Nicholas F. Brady................................ 425 98,225 23
F. Bruce Clarke.................................. 479 83,350 19
Hasso-G von Diergardt-Naglo...................... 425 77,350 19
S. Joseph Fortunato.............................. 425 344,745 57
John Wm. Galbraith............................... 325 70,100 22
Andrew H. Hines, Jr.............................. 809 106,325 23
Betty P. Krahmer................................. 425 93,475 23
Gordon S. Macklin................................ 755 321,525 52
Fred R. Millsaps................................. 479 104,325 23
</TABLE>
*For the fiscal year ended March 31, 1996.
**For the calendar year ended December 31, 1995.
***We base the number of boards on the number of registered investment companies
in the Franklin Templeton Group of Funds. This number does not include the total
number of series or funds within each investment company for which the Board
members are responsible. The Franklin Templeton Group of Funds currently
includes 60 registered investment companies, with approximately 164 U.S. based
funds or series.
Nonaffiliated members of the Board and Mr. Brady are reimbursed for expenses
incurred in connection with attending board meetings, paid pro rata by each fund
in the Franklin Templeton Group of Funds for which they serve as director,
trustee or managing general partner. No officer or Board member received any
other compensation, including pension or retirement benefits, directly or
indirectly from the Trust or other funds in the Franklin Templeton Group of
Funds. Certain officers or Board members who are shareholders of Resources may
be deemed to receive indirect remuneration by virtue of their participation, if
any, in the fees paid to its subsidiaries.
As of June 25, 1996, the officers and Board members, as a group, owned less than
1% of each class of each Fund.
Many of the Board members also own shares in other funds in the Franklin
Templeton Group of Funds. Charles B. Johnson and Rupert H. Johnson, Jr. are
brothers and the father and uncle, respectively, of Charles E. Johnson.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Managers and Services Provided. Greater European Fund's Investment
Manager is TGA. Latin America Fund's Investment Manager is TICI. Each Fund's
Investment Manager, provides investment research and portfolio management
services, including the selection of securities for the Fund to buy, hold or
sell and the selection of brokers through whom the Fund's portfolio transactions
are executed. TGA renders its services to Greater European Fund from outside the
U.S. Each Investment Manager's activities are subject to the review and
supervision of the Board to whom the Investment Manager renders periodic reports
of the Fund's investment activities. Each Investment Manager is covered by
fidelity insurance on its officers, directors and employees for the protection
of the Trust.
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The Investment Managers and their affiliates act as investment managers to
numerous other investment companies or funds and accounts. Each Investment
Manager may give advice and take action with respect to any of the other funds
it manages, or for its own account, that may differ from action taken by the
Investment Manager on behalf of each Fund. Similarly, with respect to a Fund,
the Investment Manager is not obligated to recommend, buy or sell, or to refrain
from recommending, buying or selling any security that the Investment Manager
and access persons, as defined by the 1940 Act, may buy or sell for its or their
own account or for the accounts of any other fund. The Investment Manager is not
obligated to refrain from investing in securities held by a Fund or other funds
that it manages. Of course, any transactions for the accounts of an Investment
Manager and other access persons will be made in compliance with the Trust's
Code of Ethics. Please see "Miscellaneous Information - Summary of Code of
Ethics."
Investment Management Fees. Under its investment management agreement, Greater
European Fund pays TGA a monthly fee equal on an annual basis to 0.75% of its
average daily net assets. Latin America Fund pays TICI a monthly fee equal on an
annual basis to 1.25% of its average daily net assets. Each class pays its
proportionate share of the management fee.
For the fiscal period from May 8, 1995 to March 31, 1996, before fee reductions
and expense limitations, the Greater European Fund's investment management fees
totaled $24,741 and the Latin America Fund's management fees totaled $44,350.
Under an agreement by the respective Investment Manager to limit their fees, the
Funds paid no management fees for such fiscal period.
Investment Management Agreement. The investment management agreement for Greater
European Fund is in effect until July 31, 1997 and the investment management
agreement for Latin America Fund is in effect until July 31, 1997. An investment
management agreement for a Fund may continue in effect for successive annual
periods if its continuance is specifically approved at least annually by a vote
of the Board or by a vote of the holders of a majority of the Fund's outstanding
voting securities, and in either event by a majority vote of the Board members
who are not parties to the investment management agreement or interested persons
of any such party (other than as members of the Board), cast in person at a
meeting called for that purpose. Each investment management agreement may be
terminated without penalty at any time by the Board or by a vote of the holders
of a majority of a Fund's outstanding voting securities, or by the respective
Investment Manager on 60 days' written notice, and will automatically terminate
in the event of its assignment, as defined in the 1940 Act.
Administrative Services. [PLEASE CONFIRM THE FOLLOWING DISCLOSURE.] Under an
agreement with the Trust, FT Services provides certain administrative services
and facilities for the Funds. These include preparing and maintaining books,
records, and tax and financial reports, and monitoring compliance with
regulatory requirements. FT Services is a wholly owned subsidiary of Resources.
Under the administration agreement, the Funds pay FT Services a monthly
administration fee equal to an annual rate of 0.15% of combined average daily
net assets of the funds included in the Trust (the Funds, Templeton Americas
Government Securities Fund, Templeton Growth and Income Fund and Templeton
Global Infrastructure Fund) up to $200 million, 0.135% of such combined average
daily net assets over $200 million up to $700 million, 0.10% of such combined
average daily net assets over $700 million up to 1.2 billion, and 0.075% of such
combined average daily net assets over $1.2 billion. The fee is allocated among
the Trust's five series of shares according to their respective average daily
net assets. Each class of shares of each of the
-22-
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Trust's five series of shares pays a portion of the fee, determined by the
proportion of the series that it represents.
For the fiscal period from May 8, 1995 to March 31, 1996, before fee reductions
and expense limitations, the Funds' administrative services fees totaled $4,949
for the Greater European Fund and $5,322 for the Latin America Fund. Under an
agreement by FT Services (and, prior to October 1, 1996, Templeton Global
Investors, Inc.) to limit its fees, each Fund paid no administrative services
fees for such fiscal period. After August 1, 1997, this agreement may end at any
time upon notice to the Board.
Shareholder Servicing Agent. Investor Services, a wholly-owned subsidiary of
Resources, is the Fund's shareholder servicing agent and acts as each Fund's
transfer agent and dividend-paying agent. Investor Services is compensated on
the basis of a fixed fee per account.
Custodian. The Chase Manhattan Bank, at its principal office at MetroTech
Center, Brooklyn, New York 11245, and at the offices of its branches and
agencies throughout the world, acts as custodian of each Fund. The custodian
does not participate in decisions relating to the purchase and sale of portfolio
securities.
Auditors. McGladrey & Pullen LLP, 555 Fifth Avenue, New York, New York 10017 are
the Funds' independent auditors. During the fiscal year ended March 31, 1996,
their auditing services consisted of rendering opinions on the financial
statements of each Fund included in the Funds' Annual Report to Shareholders for
the fiscal year ended March 31, 1996, and review of the Trust's filings with the
SEC and the IRS. Advisor Class shares of the Funds were not offered to the
public before January 1, 1997.
HOW DO THE FUNDS BUY SECURITIES FOR THEIR PORTFOLIOS?
The selection of brokers and dealers to execute transactions in each Fund's
portfolio is made by the Fund's Investment Manager in accordance with criteria
set forth in the investment management agreement and any directions that the
Board may give.
When placing a portfolio transaction, each Investment Manager seeks to obtain
prompt execution of orders at the most favorable net price. When portfolio
transactions are done on a securities exchange, the amount of commission paid by
a Fund is negotiated between the Investment Manager and the broker executing the
transaction. The determination and evaluation of the reasonableness of the
brokerage commissions paid in connection with portfolio transactions are based
to a large degree on the professional opinions of the persons responsible for
the placement and review of the transactions. These opinions are based on, among
others, the experience of these individuals in the securities industry and
information available to them about the level of commissions being paid by other
institutional investors of comparable size. Each Investment Manager will
ordinarily place orders to buy and sell over-the-counter securities on a
principal rather than agency basis with a principal market maker unless, in the
opinion of the Investment Manager, a better price and execution can otherwise be
obtained. Purchases of portfolio securities from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers will include a spread between the bid and ask price.
The amount of commission is not the only factor an Investment Manager considers
in the selection of a broker to execute a trade. If an Investment Manager
believes it is in a Fund's best interest, the Investment Manager
-23-
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may place portfolio transactions with brokers who provide the types of services
described below, even if it means the Fund will pay a higher commission than if
no weight were given to the broker's furnishing of these services. This will be
done only if, in the opinion of an Investment Manager, the amount of any
additional commission is reasonable in relation to the value of the services.
Higher commissions will be paid only when the brokerage and research services
received are bona fide and produce a direct benefit to a Fund or assist an
Investment Manager in carrying out its responsibilities to a Fund, or when it is
otherwise in the best interest of a Fund to do so, whether or not such services
may also be useful to the Investment Manager in advising other clients. When an
Investment Manager believes several brokers are equally able to provide the best
net price and execution, it may decide to execute transactions through brokers
who provide quotations and other services to a Fund, in an amount of total
brokerage as may reasonably be required in light of these services.
Specifically, these services may include providing the quotations necessary to
determine a Fund's Net Asset Value, as well as research, statistical and other
data.
It is not possible to place a dollar value on the special executions or on the
research services received by an Investment Manager from dealers effecting
transactions in portfolio securities. The allocation of transactions in order to
obtain additional research services permits each Investment Manager to
supplement its own research and analysis activities and to receive the views and
information of individuals and research staff of other securities firms. As long
as it is lawful and appropriate to do so, each Investment Manager and its
affiliates may use this research and data in their investment advisory
capacities with other clients. If the Trust's officers are satisfied that the
best execution is obtained, the sale of Fund shares (which shall be deemed to
include also shares of other funds which have either the same investment adviser
or an investment adviser affiliated with a Fund's Investment Manager) may also
be considered a factor in the selection of broker-dealers to execute a Fund's
portfolio transactions.
Because Distributors is a member of the National Association of Securities
Dealers, it may sometimes receive certain fees when a Fund tenders portfolio
securities pursuant to a tender-offer solicitation. As a means of recapturing
brokerage for the benefit of a Fund, any portfolio securities tendered by a Fund
will be tendered through Distributors if it is legally permissible to do so. In
turn, the next investment management fee payable to that Fund's Investment
Manager will be reduced by the amount of any fees received by Distributors in
cash, less any costs and expenses incurred in connection with the tender.
If purchases or sales of securities of a Fund and one or more other investment
companies or clients supervised by an Investment Manager are considered at or
about the same time, transactions in these securities will be allocated among
the several investment companies and clients in a manner deemed equitable to all
by the Investment Manager, taking into account the respective sizes of the funds
and the amount of securities to be purchased or sold. In some cases this
procedure could have a detrimental effect on the price or volume of the security
so far as a Fund is concerned. In other cases it is possible that the ability to
participate in volume transactions and to negotiate lower brokerage commissions
will be beneficial to a Fund.
During the fiscal years and periods indicated below, each Fund paid the
following brokerage commissions:
<TABLE>
<CAPTION>
MAY 8, 1995
TO
MARCH 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
Greater European Fund....................................... $17,067
Latin America Fund.......................................... 20,945
</TABLE>
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As of March 31, 1996, each Fund did not own securities of its regular
broker-dealers.
-25-
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HOW DO I BUY, SELL AND EXCHANGE SHARES?
Additional Information on Buying Shares
Securities laws of states where a Fund offers its shares may differ from federal
law. Banks and financial institutions that sell shares of a Fund may be required
by state law to register as securities dealers.
When you buy shares, if you submit a check or a draft that is returned unpaid to
a Fund we may impose a $10 charge against your account for each returned item.
Reinvestment Date. Shares acquired through the reinvestment of dividends will be
purchased at the Net Asset Value determined on the business day following the
dividend record date (sometimes known as the "ex-dividend date"). The processing
date for the reinvestment of dividends may vary and does not affect the amount
or value of the shares acquired.
Additional Information on Exchanging Shares
If you request the exchange of the total value of your account, declared but
unpaid income dividends and capital gain distributions will be exchanged into
the new fund and will be invested at Net Asset Value. Backup withholding and
information reporting may apply. Information regarding the possible tax
consequences of an exchange is included in the tax section in this SAI and in
the Prospectus.
If a substantial number of shareholders should, within a short period, sell
their shares of a Fund under the exchange privilege, the Fund might have to sell
portfolio securities it might otherwise hold and incur the additional costs
related to such transactions. On the other hand, increased use of the exchange
privilege may result in periodic large inflows of money. If this occurs, it is
each Fund's general policy to initially invest this money in short-term,
interest-bearing money market instruments, unless it is believed that attractive
investment opportunities consistent with the Fund's investment objective exist
immediately. This money will then be withdrawn from the short-term money market
instruments and invested in portfolio securities in as orderly a manner as is
possible when attractive investment opportunities arise.
The proceeds from the sale of shares of an investment company are generally not
available until the fifth business day following the sale. The funds you are
seeking to exchange into may delay issuing shares pursuant to an exchange until
that fifth business day. The sale of Fund shares to complete an exchange will be
effected at Net Asset Value at the close of business on the day the request for
exchange is received in proper form. Please see "May I Exchange Shares for
Shares of Another Fund?" in the Prospectus.
Additional Information on Selling Shares
Systematic Withdrawal Plan. There are no service charges for establishing or
maintaining a systematic withdrawal plan. Once your plan is established, any
distributions paid by a Fund will be automatically reinvested in your account.
Payments under the plan will be made from the redemption of an equivalent amount
of shares in your account, generally on the 25th day of the month in which a
payment is scheduled.
Redeeming shares through a systematic withdrawal plan may reduce or exhaust the
shares in your account if payments exceed distributions received from a Fund.
This is especially likely to occur if there is a market
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decline. If a withdrawal amount exceeds the value of your account, your account
will be closed and the remaining balance in your account will be sent to you.
Because the amount withdrawn under the plan may be more than your actual yield
or income, part of the payment may be a return of your investment.
A Fund may discontinue a systematic withdrawal plan by notifying you in writing
and will automatically discontinue a systematic withdrawal plan if all shares in
your account are withdrawn or if a Fund receives notification of the
shareholder's death or incapacity.
Through Your Securities Dealer. If you sell shares through your securities
dealer, it is your dealer's responsibility to transmit the order to a Fund in a
timely fashion. Any loss to you resulting from your dealer's failure to do so
must be settled between you and your securities dealer.
Redemptions in Kind. Each Fund has committed itself to pay in cash (by check)
all requests for redemption by any shareholder of record, limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of a Fund's net assets at the beginning of the 90-day period. This commitment is
irrevocable without the prior approval of the SEC. In the case of redemption
requests in excess of these amounts, the Board reserves the right to make
payments in whole or in part in securities or other assets of a Fund, in case of
an emergency, or if the payment of such a redemption in cash would be
detrimental to the existing shareholders of a Fund. In these circumstances, the
securities distributed would be valued at the price used to compute a Fund's net
assets and you may incur brokerage fees in converting the securities to cash.
Each Fund does not intend to redeem illiquid securities in kind. If this
happens, however, you may not be able to recover your investment in a timely
manner.
General Information
If dividend checks are returned to a Fund marked "unable to forward" by the
postal service, we will consider this a request by you to change your dividend
option to reinvest all distributions. The proceeds will be reinvested in
additional shares at Net Asset Value until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or verify
your current mailing address, we may deduct the costs of our efforts to find you
from your account. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for its location services.
All checks, drafts, wires and other payment mediums used to buy or sell shares
of a Fund must be denominated in U.S. dollars. We may, in our sole discretion,
either (a) reject any order to buy or sell shares denominated in any other
currency or (b) honor the transaction or make adjustments to your account for
the transaction as of a date and with a foreign currency exchange factor
determined by the drawee bank.
Special Services. The Franklin Templeton Institutional Services Department
provides specialized services, including recordkeeping, for institutional
investors. The cost of these services is not borne by a Fund.
Investor Services may pay certain financial institutions that maintain omnibus
accounts with a Fund on behalf of numerous beneficial owners for recordkeeping
operations performed with respect to such owners. For each beneficial owner in
the omnibus account, a Fund may reimburse Investor Services an amount not to
exceed the per account fee that the Fund normally pays Investor Services. These
financial institutions may also charge a fee for their services directly to
their clients.
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Certain shareholder servicing agents may be authorized to accept your
transaction request.
HOW ARE FUND SHARES VALUED?
We calculate the Net Asset Value per share of each class of each Fund separately
as of the scheduled close of the NYSE, generally 4:00 p.m. Eastern time, each
day that the NYSE is open for trading. As of the date of this SAI, the Trust is
informed that the NYSE observes the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
For the purpose of determining the aggregate net assets of each Fund, cash and
receivables are valued at their realizable amounts. Interest is recorded as
accrued and dividends are recorded on the ex-dividend date. Portfolio securities
listed on a securities exchange or on the NASDAQ National Market System for
which market quotations are readily available are valued at the last quoted sale
price of the day or, if there is no such reported sale, within the range of the
most recent quoted bid and ask prices. Over-the-counter portfolio securities are
valued within the range of the most recent quoted bid and ask prices. Portfolio
securities that are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market as
determined by an Investment Manager.
Portfolio securities underlying actively traded call options are valued at their
market price as determined above. The current market value of any option held by
a Fund is its last sale price on the relevant exchange prior to the time when
assets are valued. Lacking any sales that day or if the last sale price is
outside the bid and ask prices, options are valued within the range of the
current closing bid and ask prices if the valuation is believed to fairly
reflect the contract's market value.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
of the NYSE on each day that the NYSE is open. Trading in European or Far
Eastern securities generally, or in a particular country or countries, may not
take place on every NYSE business day. Furthermore, trading takes place in
various foreign markets on days that are not business days for the NYSE and on
which the Net Asset Value of each class for each Fund is not calculated. Thus,
the calculation of the Net Asset Value of each class for each Fund does not take
place contemporaneously with the determination of the prices of many of the
portfolio securities used in the calculation and, if events materially affecting
the values of these foreign securities occur, the securities will be valued at
fair value as determined by management and approved in good faith by the Board.
Generally, trading in corporate bonds, U.S. government securities and money
market instruments is substantially completed each day at various times before
the scheduled close of the NYSE. The value of these securities used in computing
the Net Asset Value of each class is determined as of such times. Occasionally,
events affecting the values of these securities may occur between the times at
which they are determined and the scheduled close of the NYSE that will not be
reflected in the computation of the Net Asset Value of each class. If events
materially affecting the values of these securities occur during this period,
the securities will be valued at their fair value as determined in good faith by
the Board.
Other securities for which market quotations are readily available are valued at
the current market price, which may be obtained from a pricing service, based on
a variety of factors including recent trades, institutional size
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trading in similar types of securities (considering yield, risk and maturity)
and/or developments related to specific issues. Securities and other assets for
which market prices are not readily available are valued at fair value as
determined following procedures approved by the Board. With the approval of the
Board, a Fund may utilize a pricing service, bank or securities dealer to
perform any of the above described functions.
ADDITIONAL INFORMATION ON
DISTRIBUTIONS AND TAXES
Distributions
You may receive two types of distributions from a Fund:
1. Income dividends. A Fund receives income generally in the form of dividends,
interest and other income derived from its investments. This income, less the
expenses incurred in a Fund's operations, is its net investment income from
which income dividends may be distributed. Thus, the amount of dividends paid
per share may vary with each distribution.
2. Capital gain distributions. A Fund may derive capital gains or losses in
connection with sales or other dispositions of its portfolio securities.
Distributions by a Fund derived from net short-term and net long-term capital
gains (after taking into account any net capital loss carryovers) may generally
be made twice each year. One distribution may be made in December to reflect any
net short-term and net long-term capital gains realized by a Fund as of October
31 of that year. Any net short-term and net long-term capital gains realized by
a Fund during the remainder of the fiscal year may be distributed following the
end of the fiscal year. These distributions, when made, will generally be fully
taxable to a Fund's shareholders. Each Fund may make one distribution derived
from net short-term and net long-term capital gains in any year or adjust the
timing of its distributions for operational or other reasons.
Taxes
As stated in the Prospectus, each Fund has elected to be treated as a regulated
investment company under Subchapter M of the Code. The Board reserves the right
not to maintain the qualification of a Fund as a regulated investment company if
it determines this course of action to be beneficial to shareholders. In that
case, a Fund will be subject to federal and possibly state corporate taxes on
its taxable income and gains, and distributions to shareholders will be taxable
to the extent of a Fund's available earnings and profits.
The following discussion summarizes certain U.S. federal tax considerations
incident to an investment in a Fund.
Each Fund intends to qualify as a regulated investment company under the Code.
To so qualify, each Fund must, among other things: (a) derive at least 90% of
its gross income from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or securities and gains
from the sale or other disposition of foreign currencies, or other income
(including gains from options, futures contracts and forward contracts) derived
with respect to the Fund's business of investing in stocks, securities or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition of the following assets held for less than three months: (i) stock
and securities, (ii) options, futures and forward contracts (other than options,
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futures and forward contracts on foreign currencies), and (iii) foreign
currencies (and options, futures and forward contracts on foreign currencies)
which are not directly related to the Fund's principal business of investing in
stocks and securities (or options and futures with respect to stock or
securities); (c) diversify its holdings so that, at the end of each quarter, (i)
at least 50% of the value of the Fund's total assets is represented by cash and
cash items, U.S. government securities, securities of other regulated investment
companies, and other securities, with such other securities limited in respect
of any one issuer to an amount not greater in value than 5% of the Fund's total
assets and to not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of the Fund's total assets is
invested in the securities (other than U.S. government securities or securities
of other regulated investment companies) of any one issuer or of any two or more
issuers that the Fund controls and that are determined to be engaged in the same
business or similar or related businesses; and (d) distribute at least 90% of
its investment company taxable income (which includes, among other items,
dividends, interest and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
The Treasury Department is authorized to issue regulations providing that
foreign currency gains that are not directly related to a Fund's principal
business of investing in stock or securities (or options and futures with
respect to stock or securities) will be excluded from the income which qualifies
for purposes of the 90% gross income requirement described above. To date,
however, no such regulations have been issued.
The status of the Funds as regulated investment companies does not involve
government supervision of management or of their investment practices or
policies. As a regulated investment company, a Fund generally will be relieved
of liability for U.S. federal income tax on that portion of its net investment
income and net realized capital gains which it distributes to its shareholders.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement also are subject to a nondeductible 4% excise tax. To
prevent application of the excise tax, each Fund intends to make distributions
in accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term capital gains are taxable
to you as ordinary income. Distributions of net investment income may be
eligible for the corporate dividends-received deduction to the extent
attributable to a Fund's qualifying dividend income. However, the alternative
minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distributions of net capital gains (the excess of
net long-term capital gains over net short-term capital losses) designated by a
Fund as capital gain dividends are taxable to you as long-term capital gains,
regardless of the length of time you have held the Fund's shares, and are not
eligible for the dividends-received deduction. Generally, dividends and
distributions are taxable to you, whether received in cash or reinvested in
shares of a Fund. Any distributions that are not from a Fund's net investment
income or net capital realized gain may be characterized as a return of capital
to you or, in some cases, as capital gain. You will be notified annually as to
the federal tax status of dividends and distributions you receive and any tax
withheld thereon.
Distributions by a Fund reduce the Net Asset Value of the Fund shares. Should a
distribution reduce the Net Asset Value below your cost basis, the distribution
nevertheless would be taxable to you as ordinary income or capital gain as
described above, even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, you should be careful to consider the
tax implication of buying shares just prior to a distribution by a Fund. The
price of shares purchased at that time includes the amount of the forthcoming
distribution, but the distribution will generally be taxable to you.
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Certain of the debt securities acquired by the Funds may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Funds, original issue discount that accrues on a
debt security in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code.
Some of the debt securities may be purchased by the Funds at a discount which
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount generally will be treated as ordinary income to the extent it does not
exceed the accrued market discount on such debt security. Generally, market
discount accrues on a daily basis for each day the debt security is held by a
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of a Fund, at a constant yield to maturity which takes into
account the semiannual compounding of interest.
A Fund may invest in debt securities issued in bearer form. Special rules
applicable to bearer debt may in some cases result in (i) treatment of gain
realized with respect to such a debt security as ordinary income and (ii)
disallowance of deductions for losses realized on dispositions of such debt
securities. If these special rules apply, the amount that must be distributed to
Fund shareholders may be increased as compared to a fund that did not invest in
debt securities issued in bearer form.
A Fund may invest in stocks of foreign companies that are classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
company is classified as a PFIC if at least one-half of its assets constitute
investment-type assets or 75% or more of its gross income is investment-type
income. Under the PFIC rules, an "excess distribution" received with respect to
PFIC stock is treated as having been realized ratably over the period during
which a Fund held the PFIC stock. A Fund itself will be subject to tax on the
portion, if any, of the excess distribution that is allocated to that Fund's
holding period in prior taxable years (and an interest factor will be added to
the tax, as if the tax had actually been payable in such prior taxable years)
even though the Fund distributes the corresponding income to shareholders.
Excess distributions include any gain from the sale of PFIC stock as well as
certain distributions from a PFIC. All excess distributions are taxable as
ordinary income.
A Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, a Fund generally would
be required to include in its gross income its share of the earnings of a PFIC
on a current basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed above, relating
to the taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking-to-market the Funds' PFIC
shares at the end of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as though they were
realized. If this election were made, tax at the Fund level under the PFIC rules
would generally be eliminated, but the Funds could, in limited circumstances,
incur nondeductible interest charges. Each Fund's intention to qualify annually
as a regulated investment company may limit its elections with respect to PFIC
shares.
Because the application of the PFIC rules may affect, among other things, the
character of gains, the amount of gain or loss and the timing of the recognition
of income with respect to PFIC stock, as well as subject a Fund itself to tax on
certain income from PFIC stock, the amount that must be distributed to
shareholders, and which
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will be taxed to you as ordinary income or long-term capital gain, may be
increased or decreased substantially as compared to a fund that did not invest
in PFIC stock.
Income received by a Fund from sources within foreign countries may be subject
to withholding and other income or similar taxes imposed by such countries. If
more than 50% of the value of a Fund's total assets at the close of its taxable
year consists of securities of foreign corporations, that Fund will be eligible
and intends to elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by that Fund. Pursuant to this election, you will be required
to include in gross income (in addition to taxable dividends actually received)
your pro rata share of the foreign taxes paid by a Fund, and will be entitled
either to deduct (as an itemized deduction) your pro rata share of foreign
income and similar taxes in computing your taxable income or to use it as a
foreign tax credit against your U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed if you do not itemize
deductions, but in such case you may be eligible to claim the foreign tax credit
(see below). You will be notified within 60 days after the close of the relevant
Fund's taxable year whether the foreign taxes paid by the Fund will "pass
through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed your U.S. tax attributable to your foreign source taxable income. For
this purpose, if the pass-through election is made, the source of a Fund's
income flows through to its Shareholders. With respect to a Fund, gains from the
sale of securities will be treated as derived from U.S. sources and certain
currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by a Fund. You may be unable to claim a credit for the full
amount of your proportionate share of the foreign taxes paid by a Fund. Foreign
taxes may not be deducted in computing alternative minimum taxable income and
the foreign tax credit can be used to offset only 90% of the alternative minimum
tax (as computed under the Code for purposes of this limitation) imposed on
corporations and individuals. If a Fund is not eligible to make the election to
"pass through" to its shareholders its foreign taxes, the foreign income taxes
it pays generally will reduce investment company taxable income and the
distributions by a Fund will be treated as U.S. source income.
Certain options, futures, and foreign currency forward contracts in which the
Funds may invest are "section 1256 contracts." Gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"); however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and on certain other dates as prescribed under the Code)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by a Fund which is taxed as ordinary income when
distributed to shareholders.
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A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If a Fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to you as ordinary income or long-term
capital gain may be increased or decreased as compared to a fund that did not
engage in such hedging transactions.
Requirements relating to each Fund's tax status as a regulated investment
company may limit the extent to which a Fund will be able to engage in
transactions in options, futures, and foreign currency forward contracts.
If a Fund invests in another investment company, it is possible that the Fund
would not receive information or distributions from the underlying investment
company in a time frame that permits the Fund to meet its tax-related
requirements in an optimal manner. However, it is anticipated that the Fund
would seek to minimize these risks. The diversification and distribution
requirements applicable to each Fund may limit the extent to which each Fund
will be able to invest in other investment companies.
Under the Code, gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time a Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time a Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain financial contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains and losses, referred to under the
Code as "section 988" gains and losses, may increase or decrease the amount of a
Fund's net investment income to be distributed to its shareholders as ordinary
income. For example, fluctuations in exchange rates may increase the amount of
income that a Fund must distribute in order to qualify for treatment as a
regulated investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange rates may decrease
or eliminate income available for distribution. If section 988 losses exceed
other net investment income during a taxable year, a Fund would not be able to
make ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as return of capital to shareholders for
Federal income tax purposes, rather than as an ordinary dividend, reducing your
basis in your Fund shares, or as a capital gain.
Upon the sale or exchange of your shares, you will realize a taxable gain or
loss depending upon your basis in the shares. Such gain or loss will be treated
as capital gain or loss if the shares are capital assets in your hands, and
generally will be long-term if your holding period for the shares is more than
one year and generally otherwise will be short-term. Any loss realized on a sale
or exchange will be disallowed to the extent that the shares disposed of are
replaced (including replacement through the reinvesting of dividends and capital
gain distributions in a Fund) within a period of 61 days beginning 30 days
before and ending 30 days after the disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss. Any loss realized by you on the sale of a Fund's shares held by you for
six months or less will
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be treated for federal income tax purposes as a long-term capital loss to the
extent of any distributions of long-term capital gains you received with respect
to such shares.
In some cases, you will not be permitted to take sales charges into account for
purposes of determining the amount of gain or loss realized on the disposition
of your shares. This prohibition generally applies where (i) you incur a sales
charge in acquiring the stock of a regulated investment company, (ii) the stock
is disposed of before the 91st day after the date on which it was acquired, and
(iii) you subsequently acquire shares of the same or another regulated
investment company and the otherwise applicable sales charge is reduced or
eliminated under a "reinvestment right" received upon the initial purchase of
shares of stock. In that case, the gain or loss recognized will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred a sales charge
initially. Sales charges affected by this rule are treated as if they were
incurred with respect to the stock acquired under the reinvestment right. This
provision may be applied to successive acquisitions of stock.
Each Fund generally will be required to withhold federal income tax at a rate of
31% ("backup withholding") from dividends paid, capital gain distributions, and
redemption proceeds to you if (i) you fail to furnish a Fund with your correct
taxpayer identification number or social security number and to make such
certifications as a Fund may require, (ii) the IRS notifies you or a Fund that
you have failed to report properly certain interest and dividend income to the
IRS and to respond to notices to that effect, or (iii) when required to do so,
you fail to certify that you are not subject to backup withholding. Any amounts
withheld may be credited against your federal income tax liability.
Dividends, including capital gain dividends, declared in October, November, or
December with a record date in such month and paid during the following January
will be treated as having been paid by a Fund and received by shareholders on
December 31 of the calendar year in which declared, rather than the calendar
year in which the dividends are actually received.
Distributions also may be subject to state, local and foreign taxes. U.S. tax
rules applicable to foreign investors may differ significantly from those
outlined above. This discussion does not purport to deal with all of the tax
consequences applicable to shareholders. You are advised to consult your own tax
advisers for details with respect to the particular tax consequences of an
investment in a Fund.
THE FUNDS' UNDERWRITER
Pursuant to underwriting agreements, Distributors acts as principal underwriter
in a continuous public offering for all classes of each Fund's shares. Each
underwriting agreement will continue in effect for successive annual periods if
its continuance is specifically approved at least annually by a vote of the
Board or by a vote of the holders of a majority of a Fund's outstanding voting
securities, and in either event by a majority vote of the Board members who are
not parties to the underwriting agreement or interested persons of any such
party (other than as members of the Board), cast in person at a meeting called
for that purpose. The underwriting agreement terminates automatically in the
event of its assignment and may be terminated by either party on 60 days'
written notice.
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Distributors pays the expenses of the distribution of Fund shares, including
advertising expenses and the costs of printing sales material and prospectuses
used to offer shares to the public. Each Fund pays the expenses of preparing and
printing amendments to its registration statements and prospectuses (other than
those necessitated by the activities of Distributors) and of sending
prospectuses to existing shareholders.
Distributors will not receive compensation from a Fund for acting as underwriter
with respect to the Advisor Class shares.
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HOW DO THE FUNDS MEASURE PERFORMANCE?
Performance quotations are subject to SEC rules. These rules require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by a Fund be accompanied by
certain standardized performance information computed as required by the SEC.
Current yield and average annual total return quotations used by the Funds are
based on the standardized methods of computing performance mandated by the SEC.
If a Rule 12b-1 plan is adopted, performance figures reflect fees from the date
of the plan's implementation. An explanation of these and other methods used by
the Funds to compute or express performance for the Advisor Class shares
follows. For any period prior to January 1, 1997, the standardized performance
quotations for Advisor Class will be calculated by substituting the performance
of Class I for the relevant time period, and excluding the effect of the maximum
sales charge and including the effect of Rule 12b-1 fees applicable to Class I.
Regardless of the method used, past performance is not necessarily indicative of
future results, but is an indication of the return to shareholders only for the
limited historical period used.
Total Return
Average Annual Total Return. Average annual total return is determined by
finding the average annual rates of return over one-, five- and ten-year
periods, or fractional portion thereof, that would equate an initial
hypothetical $1,000 investment to its ending redeemable value. The calculation
assumes income dividends and capital gain distributions are reinvested at Net
Asset Value. The quotation assumes the account was completely redeemed at the
end of each one-, five- and ten-year period and the deduction of all applicable
charges and fees.
The average annual total return for Advisor Class for the period from
commencement of operations through March 31, 1996 for Greater European Fund
would have been _____% and for Latin America Fund would have been ____%.
These figures were calculated according to the SEC formula:
P(1+T)(n) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period
Cumulative Total Return. The Funds may also quote the cumulative total return
for each class, in addition to the average annual total return. These quotations
are computed the same way, except the cumulative total return will be based on
the actual return for each class for a specified period rather than on the
average return over the period. The cumulative total return for Advisor Class
for the period from commencement of operations through March 31, 1996 for
Greater European Fund would have been ____% and for Latin America Fund would
have been ____%.
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Volatility
Occasionally statistics may be used to show a Fund's volatility or risk.
Measures of volatility or risk are generally used to compare a Fund's Net Asset
Value or performance to a market index. One measure of volatility is beta. Beta
is the volatility of a fund relative to the total market, as represented by an
index considered representative of the types of securities in which the fund
invests. A beta of more than 1.00 indicates volatility greater than the market
and a beta of less than 1.00 indicates volatility less than the market. Another
measure of volatility or risk is standard deviation. Standard deviation is used
to measure variability of Net Asset Value or total return around an average over
a specified period of time. The idea is that greater volatility means greater
risk undertaken in achieving performance.
Other Performance Quotations
For any period prior to January 1, 1997, sales literature about Advisor Class
may quote a current distribution rate, yield, cumulative total return, average
annual total return and other measures of performance as described elsewhere in
this SAI by substituting the performance of Class I for the relevant time period
and excluding the effect of the maximum sales charge, if applicable, and Rule
12b-1 fees applicable to Class I.
Sales literature referring to the use of the Funds as a potential investment for
Individual Retirement Accounts (IRAs), Business Retirement Plans, and other
tax-advantaged retirement plans may quote a total return based upon compounding
of dividends on which it is presumed no federal income tax applies.
A Fund may include in its advertising or sales material information relating to
investment objectives and performance results of funds belonging to the
Templeton Funds. Resources is the parent company of the advisors and underwriter
of both the Franklin Templeton Funds.
Comparisons and Other Information
From time to time, advertisements or information for a Fund may include a
discussion of certain attributes or benefits to be derived from an investment in
a Fund. The advertisements or information may include symbols, headlines, or
other material that highlights or summarizes the information discussed in more
detail in the communication.
Advertisements or information may also compare the performance of Advisor Class
to the return on CDs or other investments. You should be aware, however, that an
investment in a Fund involves the risk of fluctuation of principal value, a risk
generally not present in an investment in a CD issued by a bank. For example, as
the general level of interest rates rise, the value of a Fund's fixed-income
investments, if any, as well as the value of its shares that are based upon the
value of such portfolio investments, can be expected to decrease. Conversely,
when interest rates decrease, the value of a Fund's shares can be expected to
increase. CDs are frequently insured by an agency of the U.S. government. An
investment in a Fund is not insured by any federal, state or private entity.
In assessing comparisons of performance, you should keep in mind that the
composition of the investments in the reported indices and averages is not
identical to a Fund's portfolio, the indices and averages are generally
unmanaged, and the items included in the calculations of the averages may not be
identical to the formula used
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by a Fund to calculate its figures. In addition, there can be no assurance that
a Fund will continue its performance as compared to these other averages.
Performance information for each Fund may be compared, in reports and
promotional literature, to: (i) unmanaged indices so that investors may compare
the Fund's results with those of a group of unmanaged securities widely regarded
by investors as representative of the securities market in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, Inc., a widely
used independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in a Fund. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for a Fund reflects only the performance of a
hypothetical investment in a Fund during the particular time period on which the
calculations are based. Performance information should be considered in light of
a Fund's investment objective and policies, characteristics and quality of the
portfolio and the market conditions during the given time period, and should not
be considered as a representation of what may be achieved in the future.
From time to time, each Fund and its Investment Manager may also refer to the
following information:
(1) Each Investment Manager's and its affiliates' market share of international
equities managed in mutual funds prepared or published by Strategic Insight or a
similar statistical organization.
(2) The performance of U.S. equity and debt markets relative to foreign markets
prepared or published by Morgan Stanley Capital International or a similar
financial organization.
(3) The capitalization of U.S. and foreign stock markets as prepared or
published by the International Finance Corporation, Morgan Stanley Capital
International or a similar financial organization.
(4) The geographic and industry distribution of the Funds' portfolio and the
Funds' top ten holdings.
(5) The gross national product and populations, including age characteristics,
literacy rates, foreign investment improvements due to a liberalization of
securities laws and a reduction of foreign exchange controls, and improving
communication technology, of various countries as published by various
statistical organizations.
(6) To assist investors in understanding the different returns and risk
characteristics of various investments, each Fund may show historical returns of
various investments and published indices (e.g., Ibbotson Associates, Inc.
Charts and Morgan Stanley EAFE - Index).
(7) The major industries located in various jurisdictions as published by the
Morgan Stanley Index.
(8) Rankings by DALBAR Surveys, Inc. with respect to mutual fund shareholder
services.
(9) Allegorical stories illustrating the importance of persistent long-term
investing.
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(10) Each Fund's portfolio turnover rate and its ranking relative to industry
standards as published by Lipper Analytical Services, Inc. or Morningstar, Inc.
(11) A description of the Templeton organization's investment management
philosophy and approach, including its worldwide search for undervalued or
"bargain" securities and its diversification by industry, nation and type of
stocks or other securities.
(12) The number of shareholders in a Fund or the aggregate number of
shareholders of the Franklin Templeton Group of Funds or the dollar amount of
fund and private account assets under management.
(13) Comparison of the characteristics of various emerging markets, including
population, financial and economic conditions.
(14) Quotations from the Templeton organization's founder, Sir John Templeton,*
advocating the virtues of diversification and long-term investing, including the
following:
- "Never follow the crowd. Superior performance is possible only
if you invest differently from the crowd."
- "Diversify by company, by industry and by country."
- "Always maintain a long-term perspective."
- "Invest for maximum total real return."
- "Invest - don't trade or speculate."
- "Remain flexible and open-minded about types of investment."
- "Buy low."
- " When buying stocks, search for bargains among quality
stocks."
- "Buy value, not market trends or the economic outlook."
- "Diversify. In stocks and bonds, as in much else, there is
safety in numbers."
- "Do your homework or hire wise experts to help you."
- "Aggressively monitor your investments."
- "Don't panic."
- "Learn from your mistakes."
- "Outperforming the market is a difficult task."
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- "An investor who has all the answers doesn't even understand
all the questions."
*Sir John Templeton sold the Templeton organization to Resources in October,
1992 and resigned from each Fund's Board on April 16, 1995. He is no longer
involved with the investment management process.
- "There's no free lunch."
- "And now the last principle: Do not be fearful or negative too
often."
MISCELLANEOUS INFORMATION
A Fund may help you achieve various investment goals such as accumulating money
for retirement, saving for a down payment on a home, college costs and other
long-term goals. The Franklin College Costs Planner may help you in determining
how much money must be invested on a monthly basis in order to have a projected
amount available in the future to fund a child's college education. (Projected
college cost estimates are based upon current costs published by the College
Board.) The Franklin Retirement Planning Guide leads you through the steps to
start a retirement savings program. Of course, an investment in a Fund cannot
guarantee that these goals will be met.
The Trust is a member of the Franklin Templeton Group of Funds, one of the
largest mutual fund organizations in the U.S., and may be considered in a
program for diversification of assets. Founded in 1947, Franklin, one of the
oldest mutual fund organizations, has managed mutual funds for over 48 years and
now services more than 2.5 million shareholder accounts. In 1992, Franklin, a
leader in managing fixed-income mutual funds and an innovator in creating
domestic equity funds, joined forces with Templeton Worldwide, Inc., a pioneer
in international investing. Together, the Franklin Templeton Group has over $143
billion in assets under management for more than 4.1 million U.S. based mutual
fund shareholder and other accounts. The Franklin Templeton Group of Funds
offers 114 U.S. based mutual funds to the public. A Fund may identify itself by
its NASDAQ symbol or CUSIP number.
The Dalbar Surveys, Inc. broker-dealer survey has ranked Franklin number one in
service quality for five of the past eight years.
[NOTE: THIS INFORMATION SHOULD BE AS OF A DATE NO MORE THAN 30 DAYS PRIOR TO THE
FILING OF THE REGISTRATION STATEMENT.] As of June 25, 1996, the principal
shareholders of each Fund, beneficial or of record, are as follows:
<TABLE>
<CAPTION>
Share
Name and Address Amount Percentage
- ---------------- ------ ----------
<S> <C> <C>
GROWTH AND INCOME
FUND - CLASS I
Templeton Global
Investors, Inc. 106,102 8%
500 E. Broward Blvd.
Ste. 2100
</TABLE>
-40-
PAGE
<TABLE>
<CAPTION>
Share
Name and Address Amount Percentage
- ---------------- ------ ----------
<S> <C> <C>
Ft. Lauderdale, FL 33394
GROWTH AND INCOME
FUND - CLASS II
Smith Barney Inc. 15,637 5%
388 Greenwich Street
New York, NY 10013
INFRASTRUCTURE
FUND - CLASS II
Raymond James &
Associates, Inc. 9,549 5%
FAO John J. Whitehouse TEE
JJ Whitehouse Liv TR
8037 Pebble Creek Lane W
Ponte Vedra Beach , FL 32082
Donaldson Lufkin Jenrette 10,440 6%
Securities Corporation, Inc.
PO Box 2052
Jersey City, NJ 07303
GREATER EUROPEAN
FUND - CLASS I
Templeton Global
Investors, Inc. 50,144 10%
c/o Barry R. Forbes
500 E. Broward Blvd.
Ste. 2100
Ft. Lauderdale, FL 33394
Merrill Lynch Pierce 34,481 7%
Fenner & Smith, Inc.
PO Box 45286
Jacksonville, FL 32232-5286
PaineWebber 49,841 10%
FBO American Guaranty
& Trust Co.
TTEE Sara Brianne Kiner Trust
PO Box 15627
Wilmington, DE 19850-5627
</TABLE>
-41-
PAGE
<TABLE>
<CAPTION>
Share
Name and Address Amount Percentage
- ---------------- ------ ----------
<S> <C> <C>
PaineWebber 24,060 5%
FBO American Guaranty
& Trust Co.
Shanika Baldwin Trust
PO Box 15627
Wilmington, DE 19850-5627
GREATER EUROPEAN
FUND - CLASS II
Templeton Global
Investors, Inc. 49,979 28%
c/o Barry R. Forbes
500 E. Broward Blvd.
Ste. 2100
Ft. Lauderdale, FL 33394
PaineWebber 49,529 28%
FBO JP Barger
JPB Enterprises
8A Henshaw Street
Woburn, MA 01801-4627
Margaret M. Fields 14,673 8%
610 East Avenue, Apt. 6
Rochester, NY 14607
LATIN AMERICA
FUND - CLASS I
Templeton Global
Investors, Inc. 50,577 9%
c/o Barry R. Forbes
500 E. Broward Blvd.
Ste. 2100
Ft. Lauderdale, FL 33394
</TABLE>
-42-
PAGE
<TABLE>
<CAPTION>
Share
Name and Address Amount Percentage
- ---------------- ------ ----------
<S> <C> <C>
AMERICAS GOVERNMENT
SECURITIES FUND
Templeton Global
Investors, Inc. 283,155 72%
c/o Mike Corcoran
500 E. Broward Blvd.
Ste. 2100
Ft. Lauderdale, FL 33394
</TABLE>
From time to time, the number of Fund shares held in the "street name" accounts
of various securities dealers for the benefit of their clients or in centralized
securities depositories may exceed 5% of the total shares outstanding.
Employees of Resources or its subsidiaries who are access persons under the 1940
Act are permitted to engage in personal securities transactions subject to the
following general restrictions and procedures: (i) the trade must receive
advance clearance from a compliance officer and must be completed within 24
hours after clearance; (ii) copies of all brokerage confirmations must be sent
to a compliance officer and, within 10 days after the end of each calendar
quarter, a report of all securities transactions must be provided to the
compliance officer; and (iii) access persons involved in preparing and making
investment decisions must, in addition to (i) and (ii) above, file annual
reports of their securities holdings each January and inform the compliance
officer (or other designated personnel) if they own a security that is being
considered for a fund or other client transaction or if they are recommending a
security in which they have an ownership interest for purchase or sale by a fund
or other client.
In the event of disputes involving multiple claims of ownership or authority to
control your account, a Fund has the right (but has no obligation) to: (a)
freeze the account and require the written agreement of all persons deemed by
the Fund to have a potential property interest in the account, prior to
executing instructions regarding the account; (b) interplead disputed funds or
accounts with a court of competent jurisdiction; or (c) surrender ownership of
all or a portion of the account to the IRS in response to a Notice of Levy.
FINANCIAL STATEMENTS
The audited financial statements contained in the Annual Report to Shareholders
of a Fund, for the fiscal year ended March 31, 1996, including the auditors'
report, are incorporated herein by reference. These audited financial statements
do not include information for Advisor Class as these shares were not publicly
offered prior to the date of this SAI.
USEFUL TERMS AND DEFINITIONS
1933 Act - Securities Act of 1933, as amended
1940 Act - Investment Company Act of 1940, as amended
-43-
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Board - The Board of Trustees of the Trust
CD - Certificate of deposit
Class I, Class II and Advisor Class - Each Fund offers three classes of shares,
designated "Class I," "Class II" and "Advisor Class." The three classes have
proportionate interests in the respective Fund's portfolio. Class I and Class II
differ, however, primarily in their sales charge structures and Rule 12b-1
plans. Advisor Class shares are purchased without a sales charge and do not have
a Rule 12b-1 plan.
Code - Internal Revenue Code of 1986, as amended
Contingency Period - For Class I shares, the 12 month period during which a
Contingent Deferred Sales Charge may apply. For Class II shares, the contingency
period is 18 months. Regardless of when during the month you purchased shares,
they will age one month on the last day of that month and each following month.
Contingent Deferred Sales Charge (CDSC) - A sales charge of 1% that may apply if
you sell your shares within the Contingency Period.
Distributors - Franklin/Templeton Distributors, Inc., each Fund's principal
underwriter. The SAI lists the officers and Board members who are affiliated
with Distributors. See "Officers and Trustees."
Franklin Funds - the mutual funds in the Franklin Group of Funds(R) except
Franklin Valuemark Funds and the Franklin Government Securities Trust
Franklin Templeton Funds - The Franklin Funds, the Templeton Funds and Mutual
Series.
Franklin Templeton Group - Franklin Resources, Inc., a publicly owned holding
company, and its various subsidiaries.
Franklin Templeton Group of Funds - All U.S. registered investment companies in
the Franklin Group of Funds(R), the Templeton Group of Funds and Mutual Series.
FT Services - Franklin Templeton Services, Inc.
Investment Manager - Templeton Global Advisors Limited, P.O. Box N-7759, Lyford
Cay, Nassau, Bahamas for Greater European Fund or Templeton Investment Counsel,
Inc., Broward Financial Centre, Fort Lauderdale, FL 33394-3091 for Latin America
Fund (collectively, the "Investment Managers.")
Investor Services - Franklin/Templeton Investor Services, Inc., each Fund's
shareholder servicing and transfer agent
IRS - Internal Revenue Service
Letter - Letter of Intent
-44-
PAGE
Market Timer(s) - Market Timers generally include market timing or allocation
services, accounts administered so as to buy, sell or exchange shares based on
predetermined market indicators, or any person or group whose transactions seem
to follow a timing pattern.
Moody's - Moody's Investors Service, Inc.
Mutual Series - Franklin Mutual Series Fund Inc.
NASD - National Association of Securities Dealers, Inc.
Net Asset Value (NAV) - the value of a mutual fund is determined by deducting
the fund's liabilities from the total assets of the portfolio. The Net Asset
Value per share is determined by dividing the Net Asset Value of a Fund by the
number of shares outstanding.
NSCC - National Securities Clearing Corporation
NYSE - New York Stock Exchange
Offering Price - The public offering price is based on the Net Asset Value per
share of the class and includes the front-end sales charge, if applicable. The
maximum front-end sales charge is 5.75% for Class I and 1% for Class II. Advisor
Class has no front-end sales charge.
Qualified Retirement Plan(s) - an employer sponsored pension or profit-sharing
plan that qualifies under section 401 of the Code. Examples include 401(k),
money purchase pension, profit sharing and defined benefit plans.
REIT - Real Estate Investment Trust
Resources - Franklin Resources, Inc.
SAI - Statement of Additional Information
S&P - Standard & Poor's Corporation
SEC - U.S. Securities and Exchange Commission
Securities Dealer - A financial institution that, either directly or through
affiliates, has an agreement with Distributors to handle customer orders and
accounts with a Fund. This reference is for convenience only and does not
indicate a legal conclusion of capacity.
Templeton Funds - The U.S. registered mutual funds in the Templeton Group of
Funds except Templeton Capital Accumulator Fund, Inc., Templeton Variable
Annuity Fund, and Templeton Variable Products Series Fund
-45-
PAGE
Trust Company - Franklin Templeton Trust Company. Trust Company is an affiliate
of Distributors and both are wholly owned subsidiaries of Resources.
U.S. - United States
We/Our/Us - Unless the context indicates a different meaning, these terms refer
to the Funds and/or Investor Services, Distributors, or other wholly-owned
subsidiaries of Resources.
-46-
PAGE
APPENDIX
Corporate Bond Ratings
MOODY'S
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make the long-term risks appear
somewhat larger.
A - Bonds rated A possess many favorable investment attributes and are
considered upper medium grade obligations. Factors giving security to principal
and interest are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered medium grade obligations. They are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of interest
and principal payments is very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic
-47-
PAGE
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
S&P
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C - Bonds rated C are typically subordinated debt to senior debt that is
assigned an actual or implied CCC- rating. The C rating may also reflect the
filing of a bankruptcy petition under circumstances where debt service payments
are continuing. The C1 rating is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS: Incorporated by reference from
Registrant's 1996 Annual Report to Shareholders of Templeton
Growth and Income Fund, Templeton Global Infrastructure Fund,
Templeton Americas Government Securities Fund and Templeton
Region Funds:
Independent Auditor's Report
Investment Portfolio as of March 31, 1996
Statement of Assets and Liabilities as of March 31, 1996
Statement of Operations for fiscal year ended March 31, 1996
Statement of Changes in Net Assets for the years ended
March 31, 1996 and 1995
Notes to Financial Statements
Incorporated by reference from the Registrant's (unaudited)
June 30, 1996 Semi-Annual Report:
Investment Portfolios
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
(b) EXHIBITS
(1) Trust Instrument ***
(2) By-Laws ***
(3) Not Applicable
(4) (A) Not Applicable
(5) (A) Investment Management Agreement -
Templeton Growth and Income Fund ****
(B) Investment Management Agreement -***
Templeton Global Infrastructure Fund
(C) Investment Management Agreement -***
Templeton Americas Government Securities Fund
(E) Investment Management Agreement -
Templeton Greater European Fund ****
(F) Investment Management Agreement -
Templeton Latin America Fund ****
(6) (A) Amended and Restated Distribution Agreement ****
(B) Form of Dealer Agreement ***
(7) Not Applicable
(8) Amended and Restated Custody Agreement ****
(9) (A) Fund Administration Agreement
(B) Amended and Restated Transfer Agent Agreement ****
(C) Form of Sub-Transfer Agent Services Agreement ***
(D) Form of Shareholder Sub-Accounting Services
Agreement ***
(10) Opinion and consent of counsel (filed with Rule
24f-2 Notice) **
(11) Consent of independent public accountants
(12) Not Applicable
(13) (A) Investment Letter *
(14) Not Applicable
(15) (A)(i) Distribution Plan -- Templeton Growth and Income
Fund Class I Shares *
(ii)Distribution Plan -- Templeton Growth and Income
Fund Class II Shares *
(B)(i)Distribution Plan -- Templeton Global
Infrastructure Fund Class I Shares *
(ii)Distribution Plan -- Templeton Global
Infrastructure Fund Class II Shares *
(C)Distribution Plan -- Templeton Americas
Government Securities Fund ***
(D)(i)Distribution Plan -- Templeton Greater
European Fund Class I Shares ****
(ii)Distribution Plan -- Templeton Greater European
Fund Class II Shares ****
(E)(i)Distribution Plan -- Templeton Latin America
Fund Class I Shares ****
(ii)Distribution Plan -- Templeton Latin America
Fund Class II Shares ****
(16) Schedule showing computation of performance quotations
provided in response to Item 22 (unaudited) ***
(18) Form of Multiclass Plan *
(27) Financial Data Schedule
- --------------------
* Filed with Post-Effective Amendment No. 5 to the Registration
Statement on May 1, 1995
** Rule 24f-2 Notice filed with the Securities and Exchange Commission
on May 28, 1996.
*** Filed with Post-Effective Amendment No. 7 to the Registration
Statement on July 7, 1995.
**** Filed with Post-Effective Amendment No. 9 to the Registration
Statement on July 22, 1996.
PAGE
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Number of
TITLE OF CLASS RECORDHOLDERS
Templeton Growth and Income Fund
Shares of Beneficial Interest, 1,775 as of
par value $0.01 per Share - November 30, 1996
Class I:
Shares of Beneficial Interest, 399 as of
par value $0.01 per Share - November 30, 1996
Class II:
Templeton Global Infrastructure Fund
Shares of Beneficial Interest, 3,284 as of
par value $0.01 per Share - November 30, 1996
Class I:
Shares of Beneficial Interest, 275 as of
par value $0.01 per Share - November 30, 1996
Class II:
Templeton Americas Government Securities Fund
Shares of Beneficial Interest, 171 as of
par value $0.01 per Share - November 30, 1996
Class I:
Templeton Greater European Fund
Shares of Beneficial Interest, 693 as of
par value $0.01 per Share - November 30, 1996
Class I:
Shares of Beneficial Interest, 204 as of
par value $0.01 per Share - November 30, 1996
Class II:
Templeton Latin America Fund
Shares of Beneficial Interest, 1,114 as of
par value $0.01 per Share - November 30, 1996
Class I
PAGE
Shares of Beneficial Interest, 274 as of
par value $0.01 per Share - November 30, 1996
Class II:
ITEM 27. INDEMNIFICATION.
Reference is made to Article IV of the Registrant's
Declaration of Trust, which is filed herewith.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers
or controlling persons of the Registrant in connection with
the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers or controlling persons in
connection with the shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND ITS
OFFICERS AND DIRECTORS
The business and other connections of Templeton Global
Advisors Limited (the investment adviser of Templeton Growth
and Income Fund and Templeton Greater European Fund) and
Templeton Investment Counsel, Inc. (the investment adviser of
Templeton Global Infrastructure Fund, Templeton Americas
Government Securities Fund and Templeton Latin America Fund)
are described in Parts A and B of this Registration Statement.
For information relating to the investment advisers' officers
and directors, reference is made to Forms ADV filed under the
Investment Advisers Act of 1940 by Templeton Global Advisors
Limited and Templeton Investment Counsel, Inc.
PAGE
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of:
Franklin Templeton Japan Fund
Templeton American Trust, Inc.
Templeton Capital Accumulator Fund, Inc.
Templeton Developing Markets Trust
Templeton Funds, Inc.
Templeton Global Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global Smaller Companies Fund, Inc.
Templeton Growth Fund, Inc.
Templeton Income Trust
Templeton Institutional Funds, Inc.
Templeton Variable Products Series Fund
Franklin Asset Allocation Fund
Franklin California Tax Free Income Fund, Inc.
Franklin California Tax Free Trust
Franklin Custodian Funds, Inc.
Franklin Equity Fund
Franklin Federal Money Fund
Franklin Federal Tax-Free Income Fund
Franklin Gold Fund
Franklin High Income Trust
Franklin Investors Securities Trust
Franklin Managed Trust
Franklin Money Fund
Franklin Municipal Securities Trust
Franklin New York Tax-Free Income Fund
Franklin New York Tax-Free Trust
Franklin Premier Return Fund
Franklin Real Estate Securities Fund
Franklin Strategic Mortgage Portfolio
Franklin Strategic Series
Franklin Tax-Advantaged High Yield Securities Fund
Franklin Tax-Advantaged International Bond Fund
Franklin Tax-Advantaged U.S. Government Securities
Fund
Franklin Tax Exempt Money Fund
Franklin Tax-Free Trust
Franklin Templeton Global Trust
Franklin Templeton International Trust
Franklin Templeton Money Fund Trust
Franklin Value Investors Trust
Institutional Fiduciary Trust
(b) The directors and officers of FTD, located at 777 Mariners
Island Blvd., San Mateo, California 94404, are as follows:
<TABLE>
<CAPTION>
Position with THE REGISTRANT
NAME POSITION WITH UNDERWRITER
<S> <C> <C>
Charles B. Johnson Chairman of the Board and Director Trustee, Chairman and Vice
President
Gregory E. Johnson President None
Rupert H. Johnson, Jr. Executive Vice President and Director Vice President
Harmon E. Burns Executive Vice President and Director Vice President
Edward V. McVey Senior Vice President None
Kenneth V. Domingues Senior Vice President None
Kenneth A. Lewis Treasurer None
William J. Lippman Senior Vice President None
Richard C. Stoker Senior Vice President None
Charles E. Johnson Senior Vice President Vice President
500 E Broward Blvd.
Ft. Lauderdale, FL
Deborah R. Gatzek Senior Vice President and Assistant Vice President
Secretary
Daniel T. O'Lear Senior Vice President None
Peter Jones Senior Vice President None
700 Central Avenue
St. Petersburg, FL
James K. Blinn Vice President None
Richard O. Conboy Vice President None
James A. Escobedo Vice President None
Loretta Fry Vice President None
Robert N. Geppner Vice President None
Mike Hackett Vice President None
Bret W. Feuss Vice President None
Philip J. Kearns Vice President None
Ken Leder Vice President None
Jack Lemein Vice President None
John R. McGee Vice President None
Harry G. Mumford Vice President None
Vivian J. Palmieri Vice President None
Kent P. Strazza Vice President None
Alison Hawksley Assistant Vice President None
John R. Kay Assistant Vice President Vice President
500 E Broward Blvd.
Ft. Lauderdale, FL
Franice Arnone Assistant Vice President None
Sarah Stypa Assistant Vice President None
Andrea Dover Assistant Vice President None
Laura Komar Assistant Vice President None
Virginia Marans Assistant Vice President None
Bernadette Marino Howard Assistant Vice President None
Susan Thompson Assistant Vice President None
Leslie M. Kratter Secretary None
Philip A. Scatena Assistant Treasurer None
Karen DeBellis Assistant Treasurer Assistant Treasurer
700 Central Avenue
St. Petersburg, FL
</TABLE>
(c) Not Applicable (Information on unaffiliated underwriters).
ITEM 29. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of Franklin Templeton
Services, Inc., 500 East Broward Blvd., Fort Lauderdale,
Florida 33394.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS.
(a) Not Applicable.
(b) Not Applicable.
PAGE
(c) Registrant undertakes to call a meeting of Shareholders
for the purpose of voting upon the question f removal of a
Trustee or Trustees when requested to do so by the holders of
at least 10% of the Registrant's outstanding shares of
beneficial interest and in connection with such meeting to
comply with the shareholder communications provisions of
Section 16(c) of the Investment Company Act of 1940.
(d) Registrant undertakes to furnish to each person to whom
its Prospectus is provided a copy of its latest Annual Report,
upon request and without charge.
PAGE
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, the Registrant, as amended, the
Registrant certifies that it meets all the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of St. Petersburg in the State of Florida on the 30th day of December, 1996.
TEMPLETON GLOBAL INVESTMENT TRUST
(REGISTRANT)
By:
Mark G. Holowesko*
President
*By:/s/JOHN K. CARTER
John K. Carter
attorney-in-fact**
Pursuant to the requirements of the Securities Act of 1933, as
amended, this amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
____________________ President (Chief December 30, 1996
Mark G. Holowesko* Executive Officer)
____________________ Trustee December 30, 1996
Charles B. Johnson*
____________________ Trustee December 30, 1996
Martin L. Flanagan*
____________________ Trustee December 30, 1996
Betty P. Krahmer*
___________________ Trustee December 30, 1996
Fred R. Millsaps*
____________________ Trustee December 30, 1996
Harris J. Ashton*
____________________ Trustee December 30, 1996
S. Joseph Fortunato*
____________________ Trustee December 30, 1996
Andrew H. Hines, Jr.*
____________________ Trustee December 30, 1996
John Wm. Galbriath*
____________________ Trustee December 30, 1996
Gordon S. Macklin*
____________________ Trustee December 30, 1996
Nicholas F. Brady*
____________________ Treasurer (Chief December 30, 1996
James R. Baio* Financial and Accounting Officer)
</TABLE>
*By:/s/JOHN K. CARTER
John K. Carter
Attorney-in-fact**
** Powers of Attorney were previously filed in Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A of Templeton Global Investment
Trust (File No. 33-73244), filed on March 1, 1994, or are contained herewith.
PAGE
POWER OF ATTORNEY
The undersigned officers and Trustees of TEMPLETON GLOBAL
INVESTMENT TRUST (the "Registrant") hereby appoint Allan S. Mostoff, Jeffrey L.
Steele, William J. Kotapish, Deborah R. Gatzek, Barbara J. Green, Larry L.
Greene, and John K. Carter (with full power to each of them to act alone) his
attorney-in-fact and agent, in all capacities, to execute, and to file any of
the documents referred to below relating to Post-Effective Amendments to the
Registrant's registration statement on Form N-1A under the Investment Company
Act of 1940, as amended, and under the Securities Act of 1933 covering the sale
of shares by the Registrant under prospectuses becoming effective after this
date, including any amendment or amendments increasing or decreasing the amount
of securities for which registration is being sought, with all exhibits and any
and all documents required to be filed with respect thereto with any regulatory
authority. Each of the undersigned grants to each of said attorneys, full
authority to do every act necessary to be done in order to effectuate the same
as fully, to all intents and purposes as he could do if personally present,
thereby ratifying all that said attorneys-in-fact and agents, may lawfully do or
cause to be done by virtue hereof.
The undersigned officers and Trustees hereby execute this
Power of Attorney as of this 12th day of December, 1996.
<TABLE>
<CAPTION>
<S> <C>
/s/HARRIS J.ASHTON /s/EDITH E. HOLIDAY
Harris J. Ashton, Trustee Edith E. Holiday, Trustee
/s/NICHOLAD F. BRADY /s/CHARLES B. JOHNSON
Nicholas F. Brady, Trustee Charles B. Johnson, Trustee
/s/MARTIN L. FLANAGAN /s/BETTY P. KRAHMER
Martin L. Flanagan, Trustee Betty P. Krahmer, Trustee
/s/S. JOSEPH FORTUNATO /s/GORDON S.MACKLIN
S. Joseph Fortunato, Trustee Gordon S. Macklin, Trustee
/s/JOHN WM. GALBRAAITH /s/FRED R. MILLSAPS
John Wm. Galbraith, Trustee Fred R. Millsaps, Trustee
/s/ANDREW H. HINES, JR. /s/HASSO-G VON DIERGARDT-NAGLO
Andrew H. Hines, Jr., Trustee Hasso-G Von Diergardt-Naglo, Trustee
/s/MARK G. HOLOWESKO /s/JAMES R. BAIO
Mark G. Holowesko, President James R. Baio, Treasurer
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED WITH
POST-EFFECTIVE AMENDMENT NO. 10 TO
REGISTRATION STATEMENT
ON
FORM N-1A
TEMPLETON GLOBAL INVESTMENT TRUST
PAGE
EXHIBIT LIST
Exhibit Number Name of Exhibit
( 9)(B) Fund Administration Agreement
(27) Financial Data Schedules
PAGE
FUND ADMINISTRATION AGREEMENT BETWEEN
TEMPLETON GLOBAL INVESTMENT TRUST
AND
FRANKLIN TEMPLETON SERVICES, INC.
AGREEMENT dated as of October 1, 1996, between Templeton
Global Investment Trust (the "Investment Company"), an investment company
registered under the Investment Company Act of 1940 ("1940 Act"), on behalf of
Templeton Growth and Income Fund, Templeton Global Infrastructure Fund,
Templeton Americas Government Securities Fund, Templeton Greater European Fund,
and Templeton Latin America Fund, (each a "Fund"), separate series of the
Investment Company, and Franklin Templeton Services, Inc. ("FTS" or
"Administrator").
In consideration of the mutual promises herein made, the
parties hereby agree as follows:
(1) The Administrator agrees, during the life of this Agreement, to
provide the following services to each Fund:
(a) providing office space, telephone, office equipment
and supplies for the Fund;
(b) providing trading desk facilities for the Fund, unless
these facilities are provided by the Fund's investment adviser;
(c) authorizing expenditures and approving bills for
payment on behalf of the Fund;
(d) supervising preparation of periodic reports to
shareholders, notices of dividends, capital gains distributions and tax credits;
and attending to routine correspondence and other communications with individual
shareholders when asked to do so by the Fund's shareholder servicing agent or
other agents of the Fund;
(e) coordinating the daily pricing of the Fund's investment
portfolio, including collecting quotations from pricing services engaged by the
Fund; providing fund accounting services, including preparing and supervising
publication of daily net asset value quotations, periodic earnings reports and
other financial data; and coordinating trade settlements;
(f) monitoring relationships with organizations serving the
Fund, including custodians, transfer agents, public accounting firms, law firms,
printers and other third party service providers;
(g) supervising compliance by the Fund with recordkeeping
requirements under the federal securities laws, including the 1940 Act and the
rules and regulations thereunder, and under other applicable state and federal
laws; and maintaining books and records for the Fund (other than those
maintained by the custodian and transfer agent);
(h) preparing and filing of tax reports including the Fund's
income tax returns, and monitoring the Fund's compliance with subchapter M of
the Internal Revenue Code, as amended, and other applicable tax laws and
regulations;
(i) monitoring the Fund's compliance with: 1940 Act and other
federal securities laws, and rules and regulations thereunder; state and foreign
laws and regulations applicable to the operation of investment companies; the
Fund's investment objectives, policies and restrictions; and the Code of Ethics
and other policies adopted by the Investment Company's Board of Trustees
("Board") or by the Fund's investment adviser and applicable to the Fund;
(j) providing executive, clerical and secretarial
personnel needed to carry out the above responsibilities;
(k) preparing and filing regulatory reports, including
without limitation Forms N-1A and N-SAR, proxy statements, information
statements and U.S. and foreign ownership reports; and
(l) providing support services incidental to carrying
out these duties.
Nothing in this Agreement shall obligate the Investment Company or any Fund to
pay any compensation to the officers of the Investment Company. Nothing in this
Agreement shall obligate FTS to pay for the services of third parties, including
attorneys, auditors, printers, pricing services or others, engaged directly by
the Fund to perform services on behalf of the Fund.
(2) The Investment Company agrees, during the life of this Agreement,
to pay to FTS as compensation for the foregoing a monthly fee equal on an annual
basis to 0.15% of the first $200 million of the average daily net assets of each
Fund during the month preceding each payment, reduced as follows: on such net
assets in excess of $200 million up to $700 million, a monthly fee equal on an
annual basis to 0.135%; on such net assets in excess of $700 million up to $1.2
billion, a monthly fee equal on an annual basis to 0.10%; and on such net assets
in excess of $1.2 billion, a monthly fee equal on an annual basis to 0.075%.
From time to time, FTS may waive all or a portion of its fees provided for
hereunder and such waiver shall be treated as a reduction in the purchase price
of its services. FTS shall be contractually bound hereunder by the terms of any
publicly announced waiver of its fee, or any limitation of each affected Fund's
expenses, as if such waiver or limitation were fully set forth herein.
(3) This Agreement shall remain in full force and effect through for
one year after its execution and thereafter from year to year to the extent
continuance is approved annually by the Board of the Investment Company.
(4) This Agreement may be terminated by the Investment Company at any
time on sixty (60) days' written notice without payment of penalty, provided
that such termination by the Investment Company shall be directed or approved by
the vote of a majority of the Board of the Investment Company in office at the
time or by the vote of a majority of the outstanding voting securities of the
Investment Company (as defined by the 1940 Act); and shall automatically and
immediately terminate in the event of its assignment (as defined by the 1940
Act).
(5) In the absence of willful misfeasance, bad faith or gross
negligence on the part of FTS, or of reckless disregard of its duties and
obligations hereunder, FTS shall not be subject to liability for any act or
omission in the course of, or connected with, rendering services hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers.
FRANKLIN TEMPLETON SERVICES, INC.
By:/s/MARTIN L. FLANAGAN
Martin L. Flanagan
President
TEMPLETON GLOBAL INVESTMENT TRUST
By:/s/JOHN R. KAY
John R. Kay
Vice President
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GREATER EUROPEAN FUND SEPTEMBER 30, 1996 SEMI ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000916488
<NAME> TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 041
<NAME> TEMPLETON GREATER EUROPEAN FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 6578305
<INVESTMENTS-AT-VALUE> 6956973
<RECEIVABLES> 205457
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 47994
<TOTAL-ASSETS> 7210424
<PAYABLE-FOR-SECURITIES> 5964
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26223
<TOTAL-LIABILITIES> 32187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6635891
<SHARES-COMMON-STOCK> 526568
<SHARES-COMMON-PRIOR> 414655
<ACCUMULATED-NII-CURRENT> 101967
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 61711
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 378668
<NET-ASSETS> 7178237
<DIVIDEND-INCOME> 110537
<INTEREST-INCOME> 31905
<OTHER-INCOME> 0
<EXPENSES-NET> 65167
<NET-INVESTMENT-INCOME> 77275
<REALIZED-GAINS-CURRENT> 167792
<APPREC-INCREASE-CURRENT> 150794
<NET-CHANGE-FROM-OPS> 395861
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17165)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 162555
<NUMBER-OF-SHARES-REDEEMED> (52182)
<SHARES-REINVESTED> 1540
<NET-CHANGE-IN-ASSETS> 1439962
<ACCUMULATED-NII-PRIOR> 42720
<ACCUMULATED-GAINS-PRIOR> (106081)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24310
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 105368
<AVERAGE-NET-ASSETS> 4901689
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> .59
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 1.85<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>The expense ratio, without reimbursement equaled 3.09%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON GREATER EUROPEAN FUND SEPTEMBER 30, 1996 SEMI ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000916488
<NAME> TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 042
<NAME> TEMPLETON GREATER EUROPEAN FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 6578305
<INVESTMENTS-AT-VALUE> 6956973
<RECEIVABLES> 205457
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 47994
<TOTAL-ASSETS> 7210424
<PAYABLE-FOR-SECURITIES> 5964
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26223
<TOTAL-LIABILITIES> 32187
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6635891
<SHARES-COMMON-STOCK> 124742
<SHARES-COMMON-PRIOR> 138616
<ACCUMULATED-NII-CURRENT> 101967
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 61711
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 378668
<NET-ASSETS> 7178237
<DIVIDEND-INCOME> 110537
<INTEREST-INCOME> 31905
<OTHER-INCOME> 0
<EXPENSES-NET> 65167
<NET-INVESTMENT-INCOME> 77275
<REALIZED-GAINS-CURRENT> 167792
<APPREC-INCREASE-CURRENT> 150794
<NET-CHANGE-FROM-OPS> 395861
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (863)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 61709
<NUMBER-OF-SHARES-REDEEMED> (75665)
<SHARES-REINVESTED> 82
<NET-CHANGE-IN-ASSETS> 1439962
<ACCUMULATED-NII-PRIOR> 42720
<ACCUMULATED-GAINS-PRIOR> (106081)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24310
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 105368
<AVERAGE-NET-ASSETS> 1568691
<PER-SHARE-NAV-BEGIN> 10.32
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> .49
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 2.50<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Expense ratio without reimbursement equaled 3.74%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON LATIN AMERICA FUND SEPTEMBER 30, 1996 SEMI ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000916488
<NAME> TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 051
<NAME> TEMPLETON LATIN AMERICA FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 8501879
<INVESTMENTS-AT-VALUE> 9004089
<RECEIVABLES> 53292
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 63305
<TOTAL-ASSETS> 9120686
<PAYABLE-FOR-SECURITIES> 20945
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43894
<TOTAL-LIABILITIES> 64839
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8498968
<SHARES-COMMON-STOCK> 638552
<SHARES-COMMON-PRIOR> 489226
<ACCUMULATED-NII-CURRENT> 31966
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22703
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 502210
<NET-ASSETS> 9055847
<DIVIDEND-INCOME> 103238
<INTEREST-INCOME> 29948
<OTHER-INCOME> 0
<EXPENSES-NET> 99127
<NET-INVESTMENT-INCOME> 34059
<REALIZED-GAINS-CURRENT> 22191
<APPREC-INCREASE-CURRENT> 309667
<NET-CHANGE-FROM-OPS> 365917
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13182)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 226394
<NUMBER-OF-SHARES-REDEEMED> (78046)
<SHARES-REINVESTED> 977
<NET-CHANGE-IN-ASSETS> 2554390
<ACCUMULATED-NII-PRIOR> 13836
<ACCUMULATED-GAINS-PRIOR> 512
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 49554
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 149217
<AVERAGE-NET-ASSETS> 6139109
<PER-SHARE-NAV-BEGIN> 10.53
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .54
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.03)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.09
<EXPENSE-RATIO> 2.35<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Expense ratio without reimbursement equaled 3.61%.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON LATIN AMERICA FUND SEPTEMBER 30, 1996 SEMI ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000916488
<NAME> TEMPLETON GLOBAL INVESTMENT TRUST
<SERIES>
<NUMBER> 052
<NAME> TEMPLETON LATIN AMERICA FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 8501879
<INVESTMENTS-AT-VALUE> 9004089
<RECEIVABLES> 53292
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 63305
<TOTAL-ASSETS> 9120686
<PAYABLE-FOR-SECURITIES> 20945
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43894
<TOTAL-LIABILITIES> 64839
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8498968
<SHARES-COMMON-STOCK> 179441
<SHARES-COMMON-PRIOR> 128824
<ACCUMULATED-NII-CURRENT> 31966
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 22703
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 502210
<NET-ASSETS> 9055847
<DIVIDEND-INCOME> 103238
<INTEREST-INCOME> 29948
<OTHER-INCOME> 0
<EXPENSES-NET> 99127
<NET-INVESTMENT-INCOME> 34059
<REALIZED-GAINS-CURRENT> 22191
<APPREC-INCREASE-CURRENT> 309667
<NET-CHANGE-FROM-OPS> 365917
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2747)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60139
<NUMBER-OF-SHARES-REDEEMED> (9763)
<SHARES-REINVESTED> 242
<NET-CHANGE-IN-ASSETS> 2554390
<ACCUMULATED-NII-PRIOR> 13836
<ACCUMULATED-GAINS-PRIOR> 512
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 49554
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 149217
<AVERAGE-NET-ASSETS> 1782211
<PER-SHARE-NAV-BEGIN> 10.49
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> .52
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.01
<EXPENSE-RATIO> 3.00<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>The expense ratio, without reimbursement equaled 4.26%.
</FN>
</TABLE>
